A stepping-up of infrastructure creation and a sharper focus on digitisation will contribute more to India’s economic growth in coming years rather than the manufacturing and farm sectors, economic affairs secretary Subhash Garg said on Tuesday. The official added that the Centre’s budgetary investment in infrastructure will be raised from the current level of 2.5% of the gross domestic product with the aid of innovative financing instruments. “We need to get financing (of infrastructure) directly from people and bond markets, not banks,” Garg said at an event organised by CII here. Bank lending to infrastructure projects surged during 2010-13, but many projects turned out to be less robust, leading to a piling up of non-performing assets in the books of banks. According an estimate by Vinayak Chatterjee, noted infrastructure expert, the country requires annual investments to the tune of Rs 15 lakh crore, over half of which could possibly be met from public investments. Infrastructure-sector investment in the 2017-18 Budget is Rs 3.96 lakh crore.
While the government’s target is to grow the share of manufacturing in GDP from around 15% now to 25%, the sector hasn’t picked up in recent years. Several initiatives like the Modi government’s Make-in-India programme are yet to gather steam. Even labour-intensive manufacturing sectors like textiles and leather remain stagnant, unable to tap export prospects aggressively. The farm sector provides employment to about 47% of the total workforce although its contribution to GDP is only 18%. Moving workers from farm to non-farm is key to increasing income levels and higher GDP growth, analysts have long said.
According to Garg, the government is committed to “devoting more and more of Budget on capex”. Currently, the Centre’s budget capex is around 1.8% of GDP. In FY18, it would be spending Rs 3.1 lakh crore, which is nearly at the previous year’s level. However, capital spending by public sector (Centre, state and central public sector enterprises or CPSEs) rose from 6% of GDP in 2015-16 to 6.6% in 2016-17, as CPSEs embarked on an investment spree to expand capacity and upgrade technology. With private investment still weak, PSUs continue to play a crucial role to revive economic growth in FY18 with an investment of about Rs 4 lakh crore.
The government has managed to rope in the first foreign investor to the much-touted National Investment and Infrastructure Fund (NIIF), with sovereign wealth fund Abu Dhabi Investment Authority (ADIA) committing $1 billion. Garg said he was hopeful that $12-13 billion would be invested in infrastructure via NIIF in due course. The Centre was also strategically divesting infrastructure assets like Air India and many more such assets would soon be put on the block to mobilise resources, he added.