A government release states: “The National Infrastructure Pipeline would include greenfield and brownfield projects costing above Rs 100 crore each. Other qualifications for inclusion in the pipeline for the current year will include availability of a DPR, feasibility of implementation, inclusion in the financing plan and readiness/availability of administrative sanction.”
This is the first time that the government will list out specific projects from the private sector as part of its responsibility to get them going. Hence, this list will be larger in scope than the one on mega projects put out by the infrastructure and project monitoring division of the ministry of statistics and programme implementation.
The government’s usual rule of thumb for project management has been to manage those executed by state agencies and give broad policy directions for those run by the private sector. However, it has become necessary to include specific private sector projects in a government list since there are now far larger investments taking place in this sector.
As the government steps up the scale of project execution to ensure that lack of infrastructure does not become a constraint on economic growth, it also wants that the projects be quickly completed. When money gets locked in unfinished projects, it spells trouble for both the promoters and the banks.This leads to a high investment to output ratio, which means that the output generated per rupee of capital is low. According to a recent Crisil estimate, in the period between 2015-2019, the investment to output ratio was 4:5. Although this is better than the earlier block of five years, when it was 5:5, it still leaves a lot of room for improvement.
A report titled Infrastructure Priorities for Job Creation in India, released by the IDFC Institute this week, notes: “There is enough evidence from around the world to suggest that infrastructure investment could lead to substantial job creation”. Lead Fellow of the report, Vivek Dehejia, adds that better infrastructure like roads, reliable supply of electricity and water would allow companies to spend less on building these for their projects and instead, invest more in their core business. “For firms in the industrial region…for every 10 per cent increase in cost savings (water supply), 4.3 per cent more jobs will be created,” the report notes.
The target for the Rs 100 trillion of infrastructure projects, as stated by Prime Minister Narendra Modi in his Independence Day speech, will span both social and economic sectors. A task force under the chairmanship of the secretary, department of economic affairs, in the finance ministry, is drawing up the pipeline for this financial year, which will be released by October 31. The list for the next four years will be as per the terms of reference of the task force and will be up by the end of December this year.
“The government wants a live list to be made available to any investor from within India, including the National Investment and Infrastructure Fund, or a foreign investor like any sovereign wealth fund,” the source said. A foreign investor would prefer to see such a list and then make subsequent inquiries rather than try and find out about them from the field, the source added.
The plan for a national infra pipeline is in sync with Finance Minister Nirmala Sitharaman’s efforts. On Friday she said that she was keen to push capital expenditure in the economy for which she has examined the spending plans of select ministries with large outlays. These meetings were attended by secretaries and financial advisors of all major ministries.
A government release, too, noted that “to address the growth challenge, government has been holding wide-ranging stakeholder consultations and has taken several steps to provide a boost to the economy. (Friday’s) meeting was in continuation of the series of meetings held by secretary (expenditure) to review capex.”
India’s investment rate declined to 31.3 per cent in 2018-19, delivering a GDP growth rate of 6.8 per cent. Since then it has declined further.