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Budget 2014: Smart ideas for infra sector, but implementation a challenge

The biggest draw for the sector is Finance Minister Arun Jaitley facilitating private-sector participation by encouraging banks to extend long-term loans with flexible structuring options.

twitter-logo Sarika Malhotra        Last Updated: July 10, 2014  | 19:46 IST
Budget offers smart ideas for infra sector, implementation a challenge
Budget offers smart ideas for infra sector, implementation a challenge

The budget for 2014/15 finally brings some good news for the infrastructure sector that has been grappling with a slowdown, policy paralysis and fund shortage.

The biggest draw for the sector is Finance Minister Arun Jaitley facilitating private-sector participation by encouraging banks to extend long-term loans with flexible structuring options.FULL COVERAGE:Union Budget

Raising money for long-gestation infrastructure projects has been one of the biggest banes of the private sector in recent times. Also, by providing greater flexibility to banks with respect to minimum regulatory preemption such as the statutory liquidity requirement, cash reserve ratio and priority-sector lending, Jaitley has tried to facilitate an eco-system that will enable more funds for the beleaguered sector. It will also give a boost to the public-private partnership (PPP) model that has delivered many projects in recent times such as airports, ports and highways.

The creation of Infrastructure Investment Trusts, which would have a tax-efficient, pass-through status for PPP and other projects, would go a long way in reducing pressure on the banking system. It will also make available fresh equity from foreign and domestic sources including non-resident Indians. BUDGET SPEECH:Full text | Video

The other big impetus for the sector is allocation of Rs 7,060 crore for Prime Minister Narendra Modi's pet project to set up 100 "Smart Cities", which will be developed as satellite towns of larger cities. Also, a positive announcement has been the creation of the National Industrial Corridor Authority, which will coordinate the development of industrial corridors with smart cities linked to transport connectivity, which hints at the Centre's strategy to drive growth in manufacturing and urbanisation.

Also, constructive announcements have come with respect to developing inland waterways for transportation of goods between Allahabad and Haldia to cover a distance of 1,620 kms aimed at bringing down logistic expenses. For the sector, the directional points seem to be positive, even as detailing in some smart ideas is missing. How smartly these ideas will be implemented on the ground will remain the big challenge for the new government.

 

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