Infrastructure : The Most Benefitted Segment of Indian Economy with Union Budget 2022

 ü Honourable Finance Minister Mrs Nirmala Sitharaman presented our nation’s Union Budget for the upcoming F.Y. 2022-23 and talked about encouragement to the development & growth of the Indian Economy with an Estimated Growth Rate of 9.2% i.e., Highest Among All Large Economies.

ü Without going deep, I will try to explain & present my point of view on the budget & the sector which I believe to be the most benefitted through this year’s budget.

ü This budget consists of almost every sectors’ perspective like infrastructure, financing, agriculture, information technology and so on connecting one to another.

ü Promoting each & every sectoral goal of the government, this budget introduces us to several new schemes & programmes along with considering the schemes launched before.

ü Moreover, our government is continuously focusing on reducing imports, increasing exports, building global hubs in India & empowering domestic players inclusively MSMEs.

The Most Benefitted Sector Through This Budget:

ü In my personal opinion, the Infrastructure Sector must be the most benefitted sector in the whole Indian Economy through this budget for the upcoming financial year.

ü Infrastructure is the most widened sector of an economy which is a vital requirement for growth & development.

ü It is connected to most sectors that are dependent on it either directly or indirectly. That’s why it’s the foremost need of a developing economy.

ü The construction, logistic & raw material companies will be directly benefitted by building up new infrastructural projects for the purpose of housing, employment, tourism, agriculture, exports, capital investment, financing, green energy or IT Hubs.

Direct Benefits to Infrastructure Sector Announced in This Budget:

ü The Productivity Linked Incentive Scheme: The PLI was launched last year in 14 sectors for achieving the vision of AtmaNirbhar Bharat which received a very well response. By continuing, Finance Minister promoted the PLI Scheme again in the Budget backed by Infrastructural Projects.

ü PM GatiShakti: “A transformative approach driven by 7 engines namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways & Logistics Infrastructure were supported by the complementary roles of Energy Transmission, IT Communication, Bulk Water & Sewerage & Social Infrastructure” as said by Honourable Finance Minister. This Master Plan completely supports & empowers infrastructure development by Central & State Governments with Private Sectors. Following announcements assure that PM GatiShakti is benefitting the Infrastructure Sector primarily:

·    To create world-class modern infrastructure & logistics synergy in road transport mobility to increase the nation’s productivity, the National Highways network will be expanded by 25,000 km in 2022-23 with Rs.20,000 crores.

·  Contracts for implementation of Multimodal Logistics Parks at 4 locations through PPP mode will be awarded in 2022-23.

·      As a part of AtmaNirbhar Bharat, 2,000 km of the network will be brought under Kavach. 400 new-generation Vande Bharat Trains with better energy efficiency and passenger riding experience will be developed and manufactured during the next 3 years.

·      One hundred PM GatiShakti Cargo Terminals for multimodal logistics facilities will be developed during the next 3 years.

·      Mass Urban Transport including Connectivity to Railways

·      National Ropeways Development Programme will be taken up on PPP mode. Contracts for 8 ropeway projects for a length of 60 km will be awarded in 2022-23.

·      The Capacity Building Commission will support all the stakeholders to this scheme technically so that it will pace up the planning, design, planning & execution of PM GatiShakti Infrastructural projects.

·      NABARD will also fund & support the newly settled start-ups for building up their infrastructural requirements which will help the sector to claim its opportunities here too.

·      A new scheme, PM-DevINE will be implemented through the North-Eastern Council & fund infrastructure, in the spirit of PM GatiShakti. An initial allocation of Rs.1,500 crores will be made.

·      For 2022-23, the allocation is Rs.1 lakh crores to assist the states in catalysing overall investments in the economy. “This allocation will be used for PM GatiShakti related and other productive capital investment of the states. It will also include components for:

 Supplemental funding for priority segments of PM Gram Sadak Yojana, including support for the states’ share,

 Digitisation of the economy, including digital payments and completion of OFC network, and

 Reforms related to building bye-laws, town planning schemes, transit-oriented development, and transferable development

rights.” As Announced by Our Honourable Finance Minister.

ü MSME: Various decisions were declared in this budget especially for MSMEs which enabled the better infrastructure for them to grab the opportunities through the expected rise in cash flow.

·      Udyam, e-Shram, NCS and ASEEM portals will be interlinked with the widened scope of providing credit, skilling & recruitment to enhance opportunities for all.

·      Emergency Credit Line Guarantee Scheme (ECLGS), already provided credit to 130 lakhs+ MSMEs, will be extended up to March 2023 with the guarantee expanded by Rs.50,000 crores to the total cover of Rs.5 lakh crores.

·      Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will facilitate additional credit of Rs.2 lakh crores for MSME opportunities.

·      Raising and Accelerating MSME Performance (RAMP) Programme with an outlay of Rs.6,000 crores over 5 years will be rolled out.

ü Housing for All: The infrastructure segment is directly related to construction activities of housing or industries. In 2022-23, 80 lakh houses will be completed for the identified eligible beneficiaries of PM Awas Yojana, both rural and urban. Rs.48,000 crores are allocated for this purpose.

ü Other Programmes: Many other programmes were announced thereby which are advantageous to this sector.

·      Saksham Anganwadis are a new generation of anganwadis that have better infrastructure & audio-visual aids, powered by clean energy. Two lakhs of such anganwadis will be upgraded under this scheme.

·      Under Aspirational District Programme, besides 95% of those 112 districts that have made significant progress in key factors, the rest of the blocks with lagging factors will be developed & focused on better basic infrastructure.

·     To eliminate limited connectivity & infrastructure, the activities will be performed under the Vibrant Village Programme for the construction of village infrastructure & logistics.

ü Use of Bonds: To reduce indirect costs for suppliers & work contractors, the use of surety bonds as a substitute for a bank guarantee will be made acceptable in government procurements.

ü Export Promotion: The finance minister announced that the SEZ Act will be replaced with new legislation implemented by 30^th September 2022 that will enable the states to become partners in ‘Development of Enterprise & Service Hubs’, covering all large existing and new industrial enclaves to optimally utilise the available infrastructure and enhance the competitiveness of exports. The Optimum utilization of the available & proposed infrastructure allows such a sector to grab opportunities of high demands in the industry.

ü Financing of Investments: The budget 2022 focuses on public capital investment in the infrastructure of the economy which can be either into MSMEs, small caps or big giants or to some other sectorial logistics. Financing the economic infrastructural requirements will be complemented by private capital at a certain scale. For enhancing the financial viability of infrastructural projects, the inclusion of the PPP model shall be made possible too. The National Bank for Financing Infrastructure and Development (NaBFID) and National Asset Reconstruction Company have commenced their activities.

Indirect Benefits to Infrastructure Sector Announced in This Budget:

ü Education & Health: Various service opportunities are brought by encouraging education & health for this segment of the business. This budget promotes the expansion of ‘One Class-One TV Channel’, building up 750 virtual labs & 75 skilling e-labs set up in 2022-23 and a Digital University for the worldwide quality universal education & experience. Besides education, settling mental health counselling & care services for a basic infrastructure under ‘National Tele Mental Health Programme’ to be launched in 2022-23 including a network of 23 tele-mental health centres of excellence, with NIMHANS.

ü Skill Development: An infrastructure is not only the facilities of all resources but also having skilled human resources. Following skilling programmes & schemes were discussed in budget benefitting indirectly to this sector:

·      The National Skill Qualification Framework (NSQF) will be aligned with dynamic industry needs.

·      The DESH-Stack e-portal – will be launched, aiming to empower citizens to skill, reskill or upskill through API based online training.

·      Start-ups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS). In select ITIs, in all states, the required courses for skilling will be started.

ü Har Ghar, Nal Se Jal: An Infrastructure development involves the availability of water & electricity in households & industrial areas where Rs.60,000 crore has been made for the purpose.

ü Defence Infrastructure: Our government promotes reducing imports & empowering domestic players especially in the defence sector as a lot of funds is earmarked in the budget for setting up its industries which indirectly benefits the infrastructural companies.

ü Urban Planning: For urban capacity building, Modernization of Building Byelaws, Town Planning Schemes (TPS), & Transit-Oriented Development (TOD) will be implemented, leveraging the AMRUT scheme & reforming mass transit systems supported by the Central Government.

How the Infrastructure is the Most Benefitted?

ü The Union Budget comes with the estimate of the expenditure to be done by the government for the growth & development of the economy. Such expenditure is presented to various sectors of the nation like agriculture, information technology, defence, financing, infrastructure & logistics, education, health, insurance etc. and such expenditures are always interconnected to each other’s benefits.

For Example: If the government is announcing CAPEX for the defence sector & promoting domestic players to build up their efficiency & productivity, it will raise the need of setting up new industries & other infrastructural facilities. Thus, the outlay for the defence segment will boost the infrastructure cash flows.

ü But the point is to be considered that which sector is most benefitted allowing such direct as well as indirect benefits announced under this budget as mentioned above.

ü Pointing directly to the statistics of this budget, the outlay of CAPEX is once again being stepped up sharply by 35.4% from Rs.5.54 lakh crores in C.Y. to Rs.7.50 lakh crores in 2022-23 i.e., increased to more than 2.2 times the expenditure of 2019-20. This CAPEX outlay will be more than 2.9% of GDP.

ü Besides, with this investment taken together with the provision made for the creation of capital assets through Grants-in-Aid to States, the ‘Effective Capital Expenditure’ of the Central Government has been estimated at Rs.10.68 lakh crores in 2022-23, which will be about 4.1 per cent of GDP.

ü Thus, the creation of capital assets & pacing of cash flows for the infrastructure & logistics segment will become easier with the help of increased CAPEX & encouraging programmes or schemes like PLI, PM GatiShakti etc.

ü More the outlay flows, the more the infrastructures will be developed. The problem of low cash flows is being considered in this budget better than previous years’ budgets.

ü The government has also announced for bonds as the substitute for bank guarantee which will definitely help this sector out of cash flow issues.

ü The infrastructure & logistic segment consists of the following types of companies directly doing businesses at MSMEs to global levels:

·      Construction Companies like L&T, Lodha Group, DLF, Dilip Buildcon, Reliance Infrastructure, Punj Llyod, Hindustan Construction, NCC etc.

·      Cement Companies like Shree Cements, Ultratech, Ambuja, ACC, JK, JK Lakshmi, India Cements etc.

·      Ceramic & Stone Companies like Kajaria, Cera Sanitary, HSIL, Graphite India etc.

·      Paint & Adhesive Companies like Asian Paints, Pidilite, JSW Paints, Berger Paints, Nerolac Paints etc.

·      Metal Companies like Tata Steel, Vedanta, Welspun, Jindal, JSW, NMDC etc.

·      Electronic Component Companies like Motherson Sumi, Havells, Crompton etc.

·      Operational & Utility Companies like GMR Infra, IRB Infra, Adani Ports, etc.

·      PSUs involved thereby like Hindustan Aeronautics, RVNL, IRFC, CONCOR etc.

ü There are so many other sectorial companies which are also interconnected with infrastructure & logistics and therefore, will benefit this segment too:

·      Aerospace & Defence Companies like MTAR, Paras Defence, ZenTech, HAL etc.

·      Chemical Companies like Deepak Fertilizers, Tata Chemicals, Chambal Fertilizers, Bharat Rasayan etc.

·      Energy & Power Infrastructure Companies like Tata Power, Adani Green, Reliance, Power Grid, NTPC etc.

·      EV Companies like Amara Raja, Exide, Olectra, Tata Motors, M&M etc.

·      Financing Companies like HDFC, LIC Housing Finance, Indiabulls, ICICI, PSU Banks etc.

·      IT & AI Companies like TCS, Infosys, HCL, Cyient, KPIT, OFSS, Wipro, Tech Mahindra etc.

·      Sugar Companies like Renuka, Dalmia Bharat, Balrampur Chini, Globus Spirits etc.

·      Telecom Infrastructure Companies like Jio, Bharti Airtel, VI, TTML etc. 

ü The conclusion of presenting the ancillary sectors & their companies is that the infrastructure is that segment which the government is now involving it with other sectors more & more that allows it to get benefits from other businesses too which I think can boost it through this budget with raised CAPEX as compared to other sectors.

ü The infrastructure & logistics will directly be affected by governments outlays on the transport systems, mass transit systems, urban planning, health & education and MSMEs for making EODB 2.O.

Hence, I am sure for this sector to outperform this year considering the benefits to this sector more as compared to other segments of the Indian economy.

                                            ~ Chirayu Khandelwal