Budget gives major boost for infrastructure
Timothy Lopes, Manager | finserv@vinodkothari.com
Giving a push to the infrastructure sector has always been a top priority of the government, since developing infrastructure has a large role to play in terms of the overall growth of an economy. Infrastructure and investment were named as the third priority in the budget speech 2023-24 made by the Hon’ble Finance Minister.
CAPEX growth
The Economic Survey[1] 2022-2023, points out that total capital expenditure (State and Center both) grew at an average rate of 13.0% during FY12 and FY22, with capex doubling in the past 5 years. Further, the capex of the union government as a percentage of GDP has been on an increasing trend.
In an effort to “ramp up the virtuous cycle of investment and job creation” as mentioned by the Hon’ble Finance Minister in her speech, the budget has announced several initiatives to boost infrastructure investments.
Key budget reforms announced for infrastructure and investment
Source: Budget speech and related documents
Reviewing the Harmonized Master List
Apart from increasing capital outlay by 33% for the third year in a row, announcing the establishment of an Urban Infrastructure Development Fund (‘UIDF’)[2], continuing the 50 year interest free loans to state governments for one more year, enhancing opportunities for private investment in infrastructure and other initiatives listed out in the budget speech for boosting infrastructure and investment, one of the key highlights is the review of the ‘Harmonized Master List of Infrastructure’.
The ‘Harmonized Master List of Infrastructure sub-sectors’[3] (‘Harmonized Master List’) was introduced with the intent to guide financial institutions/ agencies that are responsible for supporting infrastructure in various ways. The Harmonized Master List lays down the sectors/ activities that qualify as ‘infrastructure’. Bank and NBFC finance to these sectors laid down in the Harmonized Master List would qualify as ‘infrastructure loans’, which are loans that are subject to different regulatory requirements given the nature of these loans. For instance, infrastructure loans are subject to different asset classification norms, concentration norms, etc.
Conclusion
The Hon’ble Finance Minister in her budget speech announced that the Harmonized Master List would be reviewed by an expert committee for recommending classification and financing framework suitable for ‘Amrit Kaal’. This proposed change to the Harmonized Master List is certainly a welcome move, since the review by an expert committee would possibly enhance and widen the scope of the present list.
At present, the Harmonized Master List consists of 5 categories, namely, (i) Transport and Logistics, (ii) Energy, (iii) Water and Sanitation, (iv) Communication and (v) Social and Commercial Infrastructure. Within these 5 categories, several infrastructure sub-sectors have been named.
[1] https://www.indiabudget.gov.in/economicsurvey/
[2] Please refer to our article on priority sector shortfalls here – https://vinodkothari.com/2023/02/meeting-priority-sector-lending-shortfalls-one-more-option/
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