Was infrastructure sector a gainer in the Interim Budget 2019?

The interim budget listed out last four years' achievements and investments in the infrastructure sector. With mention of flagship schemes like Pradhan Mantri Gram Sadak Yojna (PMGSY), UDAN (Ude Desh ka Aam Nagrik) amongst others, the government reiterated its continued thrust and commitment to these programs. However, except the housing sector where direct and indirect fiscal benefits are likely to lead to real growth, the interim budget did not delve much into direct or indirect increase in allocation or investments in other sectors.

Housing sector seems to have benefitted due to a multitude of factors including tax sops and concessions. Tax benefit to builders on unsold inventory has been increased to two years, and for buyers, benefits under section 80-IB have been extended to one more year, i.e. till March 2020. Further, exemption of tax on notional rent from second house, capital gains roll out by allowing investments in two houses instead of one earlier, are also seen to be positive moves. These steps are expected to give some real boost to the sector.

With multitude of announcements in the farming and social sectors, the government was perhaps more constrained to make allocation to the infrastructure sector. Even railways, which seem to have gotten some push, the overall capex seems to have increased only about 7-8 per cent, indicating less growth as compared to previous years. Other transportation segments like roads, aviation and ports, are likely to continue with similar allocations as previous year, and without a steep rise in public investments.

However, on a positive note, while laying out the core dimension of vision 2030, infrastructure sector ranked top of the list. To quote the minister, "The first dimension of this vision will be to build physical as well as social infrastructure for a $10 trillion economy...". Safe drinking water to all Indians, micro-irrigation techniques for efficient use of water in agriculture, road connectivity, rail network, electric vehicles, renewable energy, affordable housing, most of the sectors found mention in the budget speech. While some of the flagship programs were covered, any directions on the others like smart cities, did not find mention.

The budget seems positive around economic development, farmers' issues, and tax sops for the middle class as well as small businesses. Thrust on electric vehicles and renewables is in the right direction, however, specific steps are expected to fast-track the adoption of clean energy. There were no specific announcements in the interim budget for solar or renewables, and if the government expects to achieve its vision of energy security, then an action plan would need to be worked out.

In a nutshell, through this budget, while the Finance Minister has reiterated government's commitment to infrastructure development, no apparent big-ticket gains are seen from infrastructure perspective. One needs to wait for the main budget to see the actual allocations, which needs to take into account government's commitment and thrust on infrastructure, as also new initiatives, and alternate sources of financing these. We will continue to expect direction for large ongoing programs, which seem to be missing in the last few budgets as well.

The writer is Partner, Deloitte India

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