Revitalising Urban Infra

India needs to resolve a host of issues and explore a number of avenues to sustain its growth run

- VINAYAK CHATTERJEE

THE REVIVAL OF the public-private partnership (PPP) model and mobilisation of private capital for infrastructure investments is one of the biggest imperatives for the government. Recent reports have highlighted that new orders from the National Highways Authority of India have dropped because the finance ministry has prevented it from raising further loans. There is a fear that this could seep into other sectors. With the rapid decline of private sector investments in infrastructure from 2012 onwards, the bulk of the country’s growth has been through public expenditure. But there will be a limit to this.

Of the ₹20 lakh crore of investment envisaged under the National Infrastructure Pipeline (NIP), ₹10 lakh crore per annum is allocated from the Union Budget, while the balance ₹10 lakh crore comes from the states, private sector and extra-budgetary resources. But as this amount increases over the years, reviving private investments into India’s infrastructure sector will become critical.

The most macro way to look at the infrastructure financing requirement for India is to consider the metric called gross capital formation in infrastructure (GCFI) as a percentage of GDP. India’s GDP at current prices is estimated at ₹330 lakh crore in FY24, while GCFI would be at about 8% of the GDP at current prices, or ₹26 lakh crore. In the coming years, this is likely to grow in sync with the 12% nominal GDP growth. This is, however, not a huge amount of money. In the Budget 2024-25, I would expect the government allocation to infrastructure development to rise to ₹13-14 lakh crore, which would be matched from the other three constituents.