close_game
close_game

Union Budget 2025: Infrastructure must be engine of sustainable growth

Jan 31, 2025 01:19 PM IST

This article is authored by YR Nagaraja, managing director, Ramky Infrastructure Limited.

As the Union Budget 2025 approaches, there is palpable anticipation regarding the government’s policy direction to reinforce India’s economic growth. With a projected Gross Domestic Product (GDP) growth of 6.4% in FY25, lower than the previous year’s 8.2%, the government faces a dual challenge of balancing fiscal prudence while catalysing infrastructure development to achieve the target of a $7 trillion economy by 2030. To achieve this, the contribution of the infrastructure sector, a core growth engine for the economy, will be critical.

Union Finance Minister Nirmala Sitharaman (File image)(PTI) PREMIUM
Union Finance Minister Nirmala Sitharaman (File image)(PTI)

The past decade under Prime Minister Modi's leadership has seen an unprecedented focus on infrastructure development. Ground-breaking initiatives such as the National Infrastructure Pipeline (NIP) and the PM Gati Shakti plan have not only modernised India’s physical framework but also spurred economic growth. Despite fiscal challenges in FY24, the government has steadily increased capital expenditure, emphasizing the multiplier effect of infrastructure investments. For every rupee spent on public infrastructure, the GDP impact is two-and-a-half times, a compelling case for sustained allocation in this sector. In line with this, recent years have seen a budgetary emphasis on integrated and sustainable urban development, encompassing industrial parks, sewage treatment plants, and smart cities.

These initiatives reflect the government’s commitment to sustainable growth while addressing industrialisation, urbanisation challenges and environmental concerns and the upcoming budget must continue to address sustainable and inclusive infrastructure growth, especially in the following areas:

· Sustainable water management and sewage treatment: India’s rapid urbanisation has increased pressure on water supply and usage with a corresponding need for robust water and wastewater management systems. While programmes like the Jal Jeevan Mission have laid the groundwork, the upcoming budget must enhance funding for sewage treatment plants (STPs), especially those utilising energy-efficient technologies and circular water management practices. Incentivising private-sector participation through public-private partnerships (PPPs) and viability gap funding (VGF) can accelerate project execution.

· Industrial parks, the new growth hubs: Industrial parks have emerged as key enablers of manufacturing and logistics efficiency. Budget 2025 should prioritise policy interventions to streamline approvals, reduce compliance burdens, and foster export-oriented industrial clusters. Additional tax incentives for green infrastructure and technology adoption can make Indian industrial parks globally competitive.

· Smart cities for the future: The focus of the Smart Cities Mission has been to make urban spaces liveable, resilient, and future-ready. The budget must allocate funds for deploying Internet of Things (IoT) technologies in urban planning, energy management, and public transport systems. Encouraging private-sector innovation in these domains can boost the progress of smart cities in the country.

· Fiscal innovations for infrastructure growth: The government should also consider introducing innovative fiscal measures to attract investors and support infrastructure investments. These could be in the form of tax benefits for green infrastructure with simplified tax structures for renewable energy, waste management, and low-carbon projects. Rationalising the intra-group Special Purpose Vehicle (SPV) tax framework to allow setting-off of losses within SPV structures can make project financing more efficient. The introduction of tax incentives for trading and adopting carbon credits will encourage compliance and further aid in achieving India’s net-zero ambitions.

· Asset monetisation for sustainable investments: The government’s ambitious asset monetisation pipeline has the potential to unlock significant resources for new infrastructure development. Strengthening the regulatory framework and ensuring transparency in the bidding process will be key to boosting private sector confidence and driving greater participation. Public-private partnerships (PPPs) play a pivotal role in this landscape by combining diverse resources, technologies, expertise, and ideas to enhance the delivery of urban infrastructure assets and services. By addressing challenges in financing, design, construction, and long-term maintenance, PPPs can transform the way complex infrastructure projects are executed, ensuring efficiency and sustainability.

Infrastructure development is the cornerstone of economic revival, but several persistent challenges must be addressed to fully realise its potential. Key among these are delays in land acquisition, regulatory bottlenecks, and high borrowing costs, which continue to hinder progress on critical projects.

To overcome these hurdles, a strategic shift in cash management guidelines is imperative. This adjustment would ensure a more balanced and consistent utilisation of allocated funds throughout the financial year, preventing the year-end spending rush and empowering departments and ministries to execute projects effectively. Such measures are not just essential for meeting fiscal targets but also for accelerating the infrastructure growth that underpins India’s broader economic ambitions.

Budget 2025 must live up to its promise of being a catalyst for transformative growth so that India can achieve its dual goals of economic growth and environmental stewardship as it journeys toward a more sustainable and inclusive future.

This article is authored by YR Nagaraja, managing director, Ramky Infrastructure Limited.

rec-icon Recommended Topics
Share this article
See More

For evolved readers seeking more than just news

Subscribe now to unlock this article and access exclusive content to stay ahead
E-paper | Expert Analysis & Opinion | Geopolitics | Sports | Games
SHARE THIS ARTICLE ON
SHARE
Story Saved
Live Score
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, February 07, 2025
Start 14 Days Free Trial Subscribe Now
Follow Us On