Budget news: PPP boost in budget could set growth trajectory for infrastructure sector

In India’s vast and diverse economic development landscape, infrastructure is the backbone that supports growth and prosperity. The National Infrastructure Plan (NIP) has outlined a vision that requires a staggering investment of INR 111 lakh crores over the next five years.

This monumental task is not only a matter of national interest, but a strategic imperative for

the future of the country. Public-private partnerships (PPPs) are not the only element of this vision;
they are the key that can bridge the financial gap and drive infrastructure projects
new heights.

NIP alone recognises 8%-10% i.e. 9 lakh crores – 11 lakh crores of the total requirement
will be implemented through private investment in the form of PPP and additional Rs 3 lakh crores

5.5 lakh crores is to be generated for financing through monetization of existing assets which
This would largely involve using PPPs to monetize assets and generate real value from them
assets.Also read: India Inc. expects govt to focus on digital, physical infrastructure in upcoming budget

In total, the investment gap will have to be bridged to the tune of Rs 12 to 16 lakh crores.
through PPP investments. This gap is not a vacuum, but an opportunity – an opportunity for private

investments will be implemented through PPP.

The benefits of PPP go far beyond financial considerations. They bring
private sector efficiency in construction and operation, increasing the speed
development and quality of infrastructure. One of the key benefits is the possibility of PPP

generate additional resources outside government budgets.

The private sector collects these funds and recoups them during the project life cycle, creating a self-sustaining development ecosystem. India already has a vibrant PPP ecosystem with a large number of PPP projects in roads, airports, power transmission, silos, tourism and many other sectors, and the department of economic affairs database lists over 1,800 projects with a project cost of more than Rs 24 lakhs.

Also read: Huge shift in investment spending likely, expert says

The recent economic and social disruptions caused by the COVID-19 pandemic have forced
Policy makers should review their budget allocations, focusing more on social programs and
reducing the space available for infrastructure investment. There is a general pressure on
governments around the world to increase spending on social programs.

As a result, the budgetary resources provided under the NIP may not be fully realized for investments. The government may have to rely more on PPPs and asset monetization to meet the fund requirements of economic and infrastructure development programs.

The role of PPP in the development of state and municipal infrastructure is becoming increasingly important
significant. RBI’s State Finance Report 2023 highlights that the gross fiscal deficit
the state still exceeds 3%, which will inevitably limit the available budget resources
development of infrastructure.

The situation of municipal finances is even more uncertain due to the high dependence on state decentralization and the decreasing share of revenues generated by local governments.

The success of PPP in infrastructure financing is evident in various sectors. Motorway
and the energy sector, for example, saw significant PPP investments, accounting for 43%
participation in PPP projects in India.

These initiatives have not only funded infrastructure needs, but also introduced technological improvements and raised service levels, contributing to the development of the economy beyond traditional indicators.

As we move towards a future focused on climate resilience, a circular economy and
Sustainable Development Goals (SDGs), expertise, innovation and technology
the private sector becomes essential. Internationally, PPPs are being integrated with

infrastructure programmes aligned with sustainable development goals and climate resilience. UNECE
The initiative to develop a guide on aligning PPP projects with the Sustainable Development Goals is an example of this trend.
India, with its huge economy and infrastructure backlog, needs to embrace public-private partnerships to grow
Sustainable Infrastructure: Time to Recalibrate Our National PPP Framework to Prioritize
sustainability and climate resilience beyond simply closing the financing gap.

India’s growing economy requires rapid implementation of sustainable infrastructure
projects. With government budgets already tight, PPPs will play a dual role as
financiers and innovators. They have become an integral part of our infrastructure development
ecosystem and it is crucial to adapt our PPP policies and mechanisms to support sustainable development
practices. This will enable the infrastructure sector to make a significant contribution to India’s development
commitment to the Sustainable Development Goals.

The author is a partner at Deloitte India

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