To facilitate this infrastructure building spree, the Finance Minister announced a $2.75-billion outlay to capitalise a new development finance institution (DFI). That would build up a lending portfolio of about $70 billion within the next three years.
Prior to when Indian Finance Minister Nirmala Sitharaman presented her 2021-22 Union Budget India Global Business had foretold that her speech would be analysed closely for signs that she would be boosting and sustaining the uptrend in consumption demand seen in the economy since October last year.
Given the imperatives of driving demand across the length and breadth of the economy – she would have moved towards announcing an additional boost to the Modi government’s ongoing programme to spend $1.4 trillion on building infrastructure – in sectors such as airports, ports, roads, railways, inland waterways, digital services, urban development, energy, education, healthcare and agricultural infrastructure.
True to form the Finance Minister did not disappoint.
As part of this infrastructure push, the government plans to build seven integrated textile parks over the next three years. Textiles and its upstream and downstream sectors are extremely labour intensive and can be expected to create hundreds of thousands of direct jobs and millions of indirect ones to help absorb the army of 1012 million youth who join the country’s workforce every year.
To facilitate this infrastructure building spree, the Finance Minister announced a $2.75-billion outlay to capitalise a new development finance institution (DFI) that she said would build up a lending portfolio of about $70 billion within the next three years.
She also announced the facilitation of debt financing of emerging investment vehicles such as Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) to attract more investment in the real estate as well as infrastructure sectors. These are still relatively new investment instruments in India but are extremely popular in global markets.
Also on the anvil are the monetisation of brownfield assets such as roads, transmission lines, airports, dedicated freight corridors, railways, ports, etc.
In addition to the Western Dedicated Freight Corridor and the Eastern Dedicated Freight Corridor, which are expected to be completed by June 2022, the government is planning two more dedicated freight corridors along the east coast of the country and one running from north to south. Once completed, these will provide a massive fillip to the country’s logistics infrastructure and help bring parts of it up to global standards.
Sitharaman also announced a further $30 billion worth of such corridors and roads in the southern states of Tamil Nadu and Kerala and the eastern and north eastern states of West Bengal and Assam, respectively. All these states will elect new governments in April-May this year.
In addition, the Railways were allocated $15 billion for spending on infrastructure during the coming financial year.
The government’s goal of taking the share of manufacturing to 25 per cent of the Indian economy also received due attention in the Budget. In addition to the push the new infrastructure building activity will provide manufacturing, the new voluntary vehicle scrapping policy could bring a massive windfall to the Indian automobile sector.
Under the new policy, owners will be encouraged to scrap personal vehicles that are more than 20 years old and commercial vehicles that are 15 years or older. Speaking to a news channel after the Budget presentation, Indian Highways Minister Nitin Gadkari said at least 5 million private vehicles and more than 3.2 million commercial vehicles met the criteria for scrapping.
“People who scrap their existing vehicles will buy new ones to replace them,” he said. This will mean additional demand for cars and trucks for the Indian automobile sector, which is fast bouncing back from a terrible year during which sales slumped to multi-year lows on the back of the world’s most stringent lockdown.