BUDGET EXPECTATIONS: ROADS

17 Jan 2023 , 11:10 AM

FY2024 is a crucial year given the Government’s plans to complete the ambitious Bharatmala and allied programmes before the next elections and its continued focus on infrastructure spending to revive the economy. As a result, the capital outlay is expected to increase by 10-15%, supported by increased budgetary allocation to the sector while continuing with nil borrowings for the NHAI. The total outlay is expected to increase to more than Rs. 2.06 trillion to make up for the shortfall in private investments and slow progress in asset monetisation.

Much of the infrastructure financing in the country is currently supported by the banking sector. The availability of long-term infrastructure financing continues to be a challenge, given the twin problems faced by commercial banks of (a) asset-liability mismatch and (b) relatively high share of stressed assets. The new DFI announced in the FY2022 Budget began operations recently, but it is yet to play a meaningful role towards NIP investments. In line with last year’s Budget, given the important role played by NaBFID and NIIF to provide long-term funds to the infrastructure sector, ICRA expects the capital allocations to these DFIs to continue at last year’s levels. Further, these DFIs are expected to meet only 2-3% of the overall NIP funding requirement.

The Budget is expected to provide the much-needed boost to deepen the bond markets for the infrastructure sector by providing incentives like lowering the rating requirement threshold for insurance companies or pension funds.