The government would step up investment in the crucial infrastructure sector in the Union Budget for 2016-17 despite the extra burden of around Rs 1 lakh crore on account of the one-rank-one-pension and 7th Pay Commission recommendations.
"Public investment has been stepped up in the last year and it will continue to remain stepped up. When you fight a global slowdown, public investment has to lead the way," Union finance minister Arun Jaitley said at the foundation day of India Infrastructure Finance Company Limited (IIFCL) on Tuesday.
Jaitley said that lower oil and commodity prices provided an opportunity for India. "I find the opportunity provided by the low oil prices has enabled the government to channelise a large part of our savings in Central areas of infrastructure."
International prices of crude oil have come down to an 11-year low of $35-$37 per barrel. The government has passed on only part of the decline in oil prices to consumers while increasing the excise duty on petroleum products to mop up more revenue to keep the fiscal deficit in check.
"The years and months to come will be those where we will be Union Budget to allocate more funds to crucial sector despite extra burden of around Rs 1 lakh crore seriously investing in infrastructure. We should be able to show a much more positive result as far as the Indian economy is concerned making it a stable force, which we have become even in the midst of a crisis-like situation across the world," Jaitley further said.
Economists fear that the government would have to curtail public investment as the increased expenditure on pension for retired armed forces personnel and increased salaries of Central government staff would require a huge outlay.
The government had increased public expenditure on infrastructure projects such as highways, ports and the Railways to spur growth in a slowing economy during 2015-16 as corporate investment had started shrinking due to stressed balance sheets.
Government investment in infrastructure during April-November of this fiscal works out to Rs 1.59 lakh crore, which is 30 per cent higher than the corresponding figure for the same period of the previous financial year. This has played a crucial role in boosting the economy as private investment has slowed.
Jaitley said that the finance ministry is in touch with a large number of international sovereign and pension funds to become partners in the newly set-up National Investment and Infrastructure Fund for financing big ticket projects.
The government is considering allowing the private sector to manage smaller airports while the Railways will soon invite bids for modernisation of 400 stations.