An economy's infrastructure is pivotal in propelling its progress and setting the stage for its future development possibilities. Infrastructure development is crucial to achieve the India 2047 vision for a $ 40 trillion economy and be reclassified from a developing economy to a developed economy. In the aftermath of COVID-19 and the digitisation of the world, the focus rests not only on physical infrastructure, but on digital and social infrastructure as well.
India is undertaking ambitious infrastructure projects such as the Chenab Bridge in the state of Jammu and Kashmir, one of the tallest arch railway bridges in the world, which is built at one of the highest altitudes with a broad-gauge Indian Railway line throughout its entire span. This bridge showcases the immense talent that Indian engineers possess and is proof that with the right leadership, this talent can create innovative and sustainable infrastructure for the growth of India.
The Indian government focuses on India’s infrastructural needs and has developed various schemes and policies in this regard. The National Infrastructure Pipeline (NIP), introduced in 2019 emphasizes social and infrastructure projects including energy, roads, railways, and urban development projects worth INR 102 lakh crores. The Centre and States have nearly equal contribution (39% and 40%) while the private sector has a 21% share. NIP is complemented by the PM GatiShakti Master Plan which is dedicated to improving India’s logistics network. In India Budget 2023-24, the Indian government emphasized the need for increased spending in the infrastructure sector and nearly trebled its infrastructure spending to 3.3% of GDP compared to its spending in 2019-20. The Budget has allocated INR 75000 crores for 100 projects deemed critical to improving the overall multimodal logistics infrastructure.
For better coordination between state and centre, the central government has extended the tenure of 50-year interest free loans to state governments to help them undertake infrastructure investments and incentivise complementary policy actions in infrastructure development. The government announced that an Urban Infrastructure Development Fund (UIDF) will be established through use of priority sector lending shortfall to create urban infrastructure in Tier 2 and Tier 3 cities with an outlay of INR 10000 cr per annum. The central government has encouraged state governments to utilize resources from the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF.
Infrastructure development requires the involvement of multiple stakeholders for the overall growth of the society. Thus, the Indian infrastructure sector primarily utilises the Public-Private Partnership (PPP) approach. As per the Department of Economic Affairs, India has taken a systematic approach to create a robust PPP program for “delivery of high-priority public utilities and infrastructure.” With “close to 2000 PPP projects in various stages of implementation, India’s program is one of the largest in the world according to the World Bank.” Under PPP, infrastructure is developed under the “Build-Operate-Transfer (BOT)” model and the private sector is incentivised to build and maintain the infrastructure effectively so that more and more people use it which would provide revenue to the private sector.
The government has advised and provided financial resources to over 16 different ministries to create infrastructure under PPP. The goal is to create a seamless supply chain for the movement of goods and services. The National Logistics Policy (NLP) announced in 2022 formalizes this approach and aims to reduce the logistics cost in India to under 10% and be one of the top 25 countries in the world in the Logistics Performance Index ranking. Under NLP, the government has launched the Unified Logistics Interface Platform (ULIP) to provide all digital services related to the transportation sector into a single portal creating a single-access point for all.
Railways, one of the most important segments of India’s overall infrastructure development, has been allocated INR 2.4 lakh crores for the development of new semi high-speed Vande Bharat trains that are aimed at enhancing connectivity and for the upgradation and maintenance of railway tracks to allow for high-speed travel. This allocation to the railways sector is nearly nine times the allocation compared to a decade ago. The Ministry of Railways is in the process of developing 2 dedicated freight corridors – Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC) with over 1724 km of track commissioned till date at an expenditure of over INR 97000 crores. These freight corridors will connect important sectoral manufacturing hubs like Ludhiana and Mumbai with important ports allowing freight to be transported on these dedicated lines, thus freeing up passenger train network and reducing congestion resulting in improved on-time performance of the railways.
The government has prioritised transport infrastructure in its overall spending. Alongside Railways, Ministry of Transport and Highways allocation in the Budget increased by 36% over the previous year to develop new expressways. Many new expressways such as Delhi Mumbai expressway—with recent launch of the Dausa-Lalsot section—Bengaluru-Mysuru expressway, Agra-Lucknow expressway have been developed under the Road Connectivity scheme which has allowed for cities to be interconnected with lower travel times.
Highlighting the role of interconnected infrastructural development, many departments have partnered to launch convergence schemes. One such scheme is KRISHI- UDAN which has been launched to help farmers transport their perishable goods. Airports Authority of India (AAI) provides full waiver of Landing, Parking, Terminal Navigational Landing Charges (TNLC) and Route Navigation Facility Charges (RNFC) for Indian freighters and P2C (Passenger-to-Cargo) Aircraft. Complementing this scheme is the aviation sector-specific RCS-UDAN which incentivises airlines for providing air connectivity to low traffic routes, which were otherwise unserved. The private sector has partnered with the government for construction and operations of newer airports resulting in projected total number of airports to be 200 by end of 2024. These airports are serving upcoming commercial centres in India increasing utilisation of air cargo transport facility and empowering farmers under KRISHI-UDAN.
Likewise, Ministry of Shipping under the SagarMala scheme is developing inland waterways network throughout the country under the PPP model to promote shipping and facilitate trade. As per the latest progress report Standing Committee on Transport, Tourism and Culture, almost 56 port connectivity projects have been completed and 69 are under implementation along with completion of 33 port-led industrialisation projects.
The government has also made great strides in implementing progress in digital infrastructure through various schemes such as Digital India scheme and Telecom Technology Development Fund. There has been a 200% increase in rural internet subscriptions between 2015 and 2021 vis-a-vis 158% in urban areas. This is evidence that rural and urban connectivity is catching up. Between 2019-2021, 95.76 million internet subscribers were added in rural areas vis-a-vis 92.81 million in urban areas.
Cumulatively, the collective development of India’s infrastructure propels India’s economic growth. With increased demand for labour, goods and capital expenditure on infrastructure, there is an increase in industrial growth. Studies by the Reserve Bank of India and the National Institute of Public Finance and Policy estimate that for every rupee spent on infrastructure, there is a 2.5 to 3.5 rupee gain in GDP. Trade benefits as logistics and connectivity improve and the public benefits from a better quality of life with improvement in critical infrastructure and an overall increase in per capita income. India can thus truly realize its vision of becoming a developed nation by 2047.
Source: Invest India