Finance minister Arun Jaitley has proposed to increase investment in infrastructure by Rs 70,000 crore in 2015-16 from the previous year, to be funded by the Centre and Central Public Sector Enterprises (CPSEs).
With a view to aligning infrastructure with the growth ambitions of the government, he increased the outlay on roads by Rs 14,031 crore and the gross budgetary support to the Railways by Rs 10,050 crore.
The capital expenditure of public sector units is expected to be Rs 3,17,889 crore, an increase of approximately Rs 80,844 crore over the Revised Estimate for 2014-15.
The lack of infrastructure development is a big challenge for the government, the finance minister said. “Our second challenge is increasing investment in infrastructure,” he added. “With private investment in infrastructure via the public private partnership (PPP) model still weak, public investment needs to step in to catalyse investments.”
The finance minister said he proposes to revisit and revitalise the PPP model, adding that “In infrastructure projects, the sovereign will have to bear a major part of the risk without, of course, absorbing it entirely.”
The government also proposed to set up a National Investment and Infrastructure Fund (NIIF), and proposes to ensure an annual flow of `20,000 crore to it.
“This will enable the trust to raise debt, and in turn, invest as equity, in infrastructure finance companies such as the Indian Railway Finance Corporation and the National Housing Board. Infrastructure finance companies can then leverage this extra equity manifold,” he said.
He also said he intends to permit tax free infrastructure bonds for the projects in the rail, road and irrigation sectors.
“The thrust on infrastructure bodes well for the future of the economy... This will also boost the NRI’s confidence and appetite for investment into India. At the same time, the lack of specific measures or incentives to tap the investment potential of NRIs is disappointing,” said Srichand P Hinduja, global chairman, Hinduja Group.