Union Budget 2019: It made the right noises but rushed past concrete measures for full infra development
Nirmala Sitharaman's maiden Budget underscored the vital role of infrastructure in India's growth. However, it also missed on a number of key areas to strengthen exactly that.
The Finance Minister has proposed an ambitious target, making India a $3 trillion economy by this year-end and $5 trillion by 2024, rising from the current level of $2.7 trillion. To this end, it has projected a growth rate for GDP as 8%. This is all very exciting — but it would require massive investments with productive outcomes in the infrastructure sector, which includes power, bridges, dams, roads and urban infrastructure development.
In 2018, India ranked 44th out of 167 countries in the World Bank's Logistics Performance Index (LPI) 2018. Besides logistics, the FM also flagged the significance of development of social infrastructure as well.
On the positive side, the Budget flagged many lofty landmarks and ideals. However, a closer scrutiny brings out certain fundamental issues that need to be addressed to bring about the desired results — even in the short-run.
Economic equity
While the FM is right is highlighting that India is the world's 6th largest economy by nominal GDP and 3rd largest, after China and the USA, by purchasing power parity (PPP), we also need to note the high economic inequity in our society. This is indicated in the fact that the richest 10% persons hold 74% of the country’s wealth, whereas the poorest 10% hold only 0.2 per cent.
Income inequality in India (2014)
It is also important to note that despite the high figures for overall GDP, the per capita income for India is still low, which gave India the rank of 115 in the global scenario (2016). It is, therefore, of utmost urgency that equitable growth should be adopted as an avowed objective for the development vision of the country. Else, it would lead to social discontent, leading to crime and law and order problems, notwitstanding achievements in overall high levels of GDP.
Project management
The FM indicated enhanced involvement of PPP in infrastructure development, including for metro rail projects, besides FDI in many sectors, including aviation.
However, past experience has shown that the infrastructure projects are often marred by execution delays and cost overruns that are attributable to complex land acquisitions and environmental issues. In addition, the governance framework for contract management has also become an issue for urgent attention, as a good number of project contracts are ending up in arbitration and litigation. The sad part is that these disputes generally hurt entrepreneurs and the government alike and end up decelerating project outcomes.
The need of the hour is to undertake a thorough review of the contract documents and revise the same in line with the framework recommended by the International Federation of Consulting Engineers (commonly known as FIDIC), with a view to ensuring free and fair treatment to the contract executing agencies.
Housing for all and Slum-free cities
The focus of the mission ‘Housing For All (HFA)’ is the economically weaker families — that focus is indeed right. However, despite constructing crores of EWS houses, the population living in slums has not shown any significant decline.
The allottees of EWS houses seldom move into the allotted houses, which are highly subsidised — and wherever they do shift, their earlier abode in the slum are occupied by some other poor family. There are also numerous instances of EWS houses being sold off at a premium to richer persons through some or the other loophole in the law.
Therefore, the option of rental housing for EWS families, coupled with a determined demolition of slums earlier occupied by the EWS allottees, can alone help in attaining the target of housing for all and slum-free cities.
Roads to prosperity
Development of roads and railways is indeed the backbone of speedy and equitable growth of the coutry — and the FM has underscored the need for strengthening the communication network through Railways, Bharatmala, Sagarmala, Waterways (Jal Marg Vikas) and PMGSY.
The announcement for the development of 1.25 lakh kms of rural roads with investment of Rs. 80,250 crore under PMGSY is appreciable.
However, the Budget speech did not make any specific proposal for accelerated development of national and state highways, except for mentioning that the government will carry out a comprehensive restructuring of national highway programme to ensure that the national highway grid of desirable length and capacity is created using financeable model and that after completing the Phase 1 of Bharatmala, in the second phase, states will be helped to develop state road networks.
This is not enough as a holistic vision for the development of road networks of the country is required.
In the absence of such a visionary framework, the roads are unable to provide optimal economic benefits and get engulfed with haphazard ribbon development, culminating in the development of informal settlements, traffic jams, environmental pollution and road accidents.
The government should forthwith set up a time-bound mission for development of a vision and action plan for the road network in the country, that should encompass the national and state highways as well as subsidiary networks including district and subsidiary roads. This vision should also propose a framework for integrated social and economic development of the influence zones of the roads. The model of transit-oriented development, which has been noted in the Budget speech only in the context of railways, needs to be adopted for the development of road network also.
All in all, the FM can be given credit for having introduced some ideas in the Budget within just a few weeks of assuming office.
But the experience of past successes as well as failures of the achievement of fundamental growth — with equity and sustainability — needs many loose ends to be pursued now, for proper resolution.