- To achieve the GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion (Rs. 100 lakh crore) over these years on infrastructure. In the past decade (FY 2008-17), India invested about $1.1 trillion on infrastructure. The challenge is to step-up annual infrastructure investment so that lack of infrastructure does not become a binding constraint on the growth of the Indian economy.
- Prime Minister in his Independence Day-2019 speech highlighted that Rs.100 lakh crore would be invested on infrastructure over the next five years including social and economic infrastructure projects.
- To achieve this objective, a Task Force was constituted to draw up the National Infrastructure Pipeline (NIP) for each of the years from FY 2019-20 to FY 2024-25 with the approval of the Finance Minister. The Task Force is chaired by Secretary, DEA with CEO (NITI Aayog), Secretary (Expenditure), Secretary of the Administrative Ministries, and Additional Secretary (Investments), DEA as members and Joint Secretary (IPF), DEA as Member Secretary.
- The first meeting of the Task Force was held in September 2019. Subsequently, several meetings were held with various Departments/Ministries engaged in infrastructure development, Corporates engaged in infrastructure development & construction, Banks/Financial Institutions, Private Equity funds, and Industry Associations, including CII, FICCI & ASSOCHAM, to seek information as well as suggestions on reforms required in infrastructure sectors.
- This exercise, the first of its kind, is expected to be followed up by a periodical review process. NIP will enable a forward outlook on infrastructure projects which will create jobs, improve ease of living, and provide equitable access to infrastructure for all, thereby making growth more inclusive. NIP includes economic and social infrastructure projects.
- On the basis of the information compiled as on date, total project capital expenditure in infrastructure sectors in India during the fiscals 2020 to 2025 is projected at over Rs 102 lakh crore.
- During the fiscals 2020 to 2025, sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India.
- Out of the total expected capital expenditure of Rs. 102 lakh crore, projects worth Rs 42.7 lakh crore (42%) are under implementation, projects worth Rs 32.7 lakh crore (32%) are in conceptualization stage and rest are under development. It is expected that projects of certain states, which are yet to communicate their pipelines, would be added to the pipeline in due course.
- The Task Force in its detailed report has given recommendations on changes required to several key sectoral policies and other reform initiatives to be initiated by Central and State Governments. A monitoring mechanism has also been suggested to ensure timely implementation.
Report of the NIP Task-Force
The task force headed by Atanu Chakraborty, the economic affairs secretary in the finance ministry, on National Infrastructure Pipeline, submitted its final report to the Finance Minister on May 20202.
The following observations and recommendations were made:
- Investment needed: ₹111 lakh crore over the next five years (2020-2025) to build infrastructure projects and drive economic growth.
- Energy, roads, railways and urban projects are estimated to account for the bulk of projects (around 70%).
- The monetisation of infrastructure assets. Setting up of development finance institutions.
- Strengthening the municipal bond market.
- The Union Minister for Finance and Corporate Affairs launched the India Investment Grid website to provide information on large-scale government infrastructure projects which will aid potential investors and companies in making an informed decision regarding investments. The website is designed to give real-time data regarding the implementation of the National Infrastructure Pipeline.
Issues of implementation in infrastructure sector
In Infrastructure development there are several stages: design stage, finance stage, bidding stage, construction stage and operation stage.
- It involves making blueprint of the projects, finance stage deals with getting funds or investments, bidding are mainly about assigning the projects to suitable companies, and construction and operational stage deals with on ground physical implementations of the projects.
- There are few caveats at each stage, in the design stage, India lags behind countries like China which focus more on the design stage than any other stage to enhance the standards of their infrastructure.
- To develop projects from ideas on paper, corporate bonds and long term financing is required for the development of the projects.
- Government resources like tax money are not adequate therefore there is a need to raise money capital from the private sector and foreign investments.
- However the borrowed money is to be paid back, announcing freebies like free electricity to get political mileage increases the economic stress on infrastructure.
- Many companies are awarded contracts in corrupt ways through crony capitalism. Many times in the bidding of a project design and past record of the bidder are not properly scrutinised.
- Due to land acquisition delays and litigation issues, the rate of implementation of projects is very slow on global standards, due to which India is behind than most of the countries in rate of project execution, the NIP dashboard does not address these issues.
- Getting approvals are very difficult in terms of land access, environmental clearance, and impending litigation in court delays the infrastructure projects.
- Lot of foreign investment is available for completed assets for example Delhi and Hyderabad metro, but new projects are not looked at by the foreign investors.
- Thus it is the responsibility of the government to initiate the primary construction which could be done by using Indian rupees.