Economy India, a Strong V-Shaped Recovery

India eye on rapid and inclusive economic growth spree! 

The Economic Survey has observed that in-spite of an unprecedented COVID-19 pandemic and consequential challenges, the infrastructure sector of Indian economy are on a fast recovery path. The Survey was tabled in the Parliament by the Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman. 

The Survey observes that the growth of Infrastructure in the country has remained a key priority for the Government. The strong forward- backward linkages of the infrastructure sector are well established. Therefore, investment in infrastructure is quintessential for more rapid and inclusive economic growth. 

The Economic Survey notes that the Government of India has launched the National Infrastructure Pipeline (NIP) for the FY 2020-2025 to facilitate the implementation of world class infrastructure projects. This first of its kind initiative will boost the economy, generate better employment opportunities, and drive the competitiveness of the Indian economy. 

It is jointly funded by the Central Government, the State Governments, and the private sector. The NIP was launched with the projected infrastructure investment of Rs. 111 lakh crore ($1.5 trillion) during the period 2020-2025. The sectors like energy, roads, urban infrastructure, railways have a major share in the NIP. 

The Economic Survey observes that in India, private investment in infrastructure has come mainly in the form of Public-Private Partnerships (PPPs). PPPs help in addressing the infrastructure gap as well as improve efficiency in infrastructure service delivery. 

The Government of India has set up the Public Private Partnership Appraisal Committee (PPPAC) responsible for appraisal of PPP projects in the Central sector. During FY20, PPPAC recommended 5 projects with total project cost of Rs. 4,321 crore. Out of these 5 projects, 4 are railway sector projects (passenger train projects) and 1 is port sector project.

Resilience of infrastructure sector is the key to further economic growth. According to Economic Survey, this recovery is expected to be just the beginning of strong era of economic growth of India.

Further improvement and firming up in industrial activities, enhanced capital expenditure by the Government, the vaccination drive and the resolute push forward on long pending reform measures are expected to provide the much needed support to the ongoing recovery path. 

It is pertinent to point out that the reforms undertaken in the country are probably one of the most comprehensive among the major economies of the world.

In FY21, PPPAC recommended 7 projects with total project cost of Rs. 66,600.59 crore. 

Out of these 7 projects, 1 is a telecom sector project, 3 are railway sector projects (2 station redevelopment projects & 1 passenger train project), 2 are MHA sector projects (Eco-tourism projects) and 1 is port sector project.

The Survey tabled in the Parliament has taken note of the initiative of GOI to approve the continuation of the revamped Infrastructure Viability Gap Funding (VGF) scheme till 2024-25. 

Revamping of the proposed VGF scheme will attract more PPP projects and facilitate the private investment in the social sectors (Health, Education, Waste Water, Solid Waste Management, Water Supply etc.). The revamped Scheme is mainly related to introduction of the two sub-schemes for mainstreaming private participation in social infrastructure. 

According to the Economic Survey, Roads & Highways, Coal, Railways, Aviation, Telecom, Ports and Energy are the key infra sectors that are powering this resurgence in infrastructure sector even in the COVID year.

Sector Wise Information:

Total investment in the Roads and Highway sector has gone up more than three times in the six years period from FY15 to FY20 which also led to increased road density across the States. In FY 20 the total investment in Roadways had increased to Rs 172767 crore as compared to Rs 51935 crore in FY 15. 

Like the road, aviation sector too has shown a great strength as well. Despite the severe challenges posed by Covid-19, the Indian aviation industry has persevered through the crisis and demonstrated long-term resilience and full commitment to serve.  The aviation market of India is one of the fastest growing in the world. India’s domestic traffic has more than doubled from around 61 million in FY14 to around 137 million in FY20, a growth of over 14 per cent per annum.  The Vande Bharat Mission was launched on 7th May 2020 to evacuate stranded Indians across the world. 

It has thus reported over 30 lakh passenger arrivals by 13 December 2020, making it the largest evacuation mission in human history. Air passenger travel and aircraft movements are predicted to reach pre-COVID level in early 2021 as a result of swift and decisive interventions and effective measures put in place by the Government.

The ports and shipping sector is the backbone of international shipment of goods and Services. According to the Economic Survey, the sector has shown strong resilience as well. 

The Sagarmala program has identified 500+ development projects which can unlock the opportunities for port led development and are expected to mobilize more than Rs 3.59 lakh crores of infrastructure investment. 

Story of Indian Railways this year has been a story of grit, victories and capacity expansion. Railways have allowed the private players to operate in the Railways sector through the PPP mode under the "New India New Railway" initiative. 

The initiative is expected to garner an investment of about Rs. 30,000 crore from the private sector. Economic Survey tabled in the Parliament today also states that the Ministry of Railways has developed a National Rail Plan (NRP) with a long term vision. 

It aims at developing adequate rail infrastructure by 2030 to cater to the projected traffic requirements up to 2050. In the telecom sector, the Survey adds, the Government of India has laid considerable emphasis on broadband for all as a part of its Digital India Campaign. 

Efforts are being made to address the digital divide by extending inclusive internet access to every Indian citizen. The number of internet subscribers (both broadband and narrowband put together) stood at 776.45 million at the end of September-2020 as compared to 636.73 million in March-2019. The wireless data usage grew at exponential rate during the calendar year 2019 and was at 76.47 Exa bytes. During January-September 2020, it had already reached 75.21 Exa bytes. 

The Government of India has taken various initiatives including BharatNet for achieving the goal of Digital India programme. Under the project, network infrastructure is being established for Broadband Highways, accessible on a non-discriminatory basis, to provide affordable broadband services to citizens and institutions in rural areas, in partnership with States and the private sector. 

As on 15.01.2021 about 4.87 lakh kms of optical fiber cable has been laid to cover 1.63 lakh Gram Panchayats (GPs) and nearly 1.51 lakh GPs have become service ready.

Economic Survey notes that India is the third-largest energy consumer in the world after USA and China. With a share of 5.8 per cent of the world’s primary energy consumption, the Indian energy consumption basket is primarily dominated by Coal and Crude Oil. 

India’s indigenous crude oil production declined to 32.17 Million Metric Tonnes (MMT) in FY20 as against 34.20 MMT in FY19. The decline in production is mainly on account of the spread of COVID-19. Therefore, production is expected to return to normalcy given the economic recovery.  

During FY20, most refineries had planned shutdowns for the implementation of quality upgradation projects. Crude processed during April-December 2020 was 160.36 MMT which is 15.8 per cent lower than crude processed during April-December 2019. Despite this, the Government provided much needed support to poor households by distributing over 14 crore free LPG cylinders and continued uninterrupted fuel supplies across the country throughout COVID-19 lockdown. 

Economic Survey highlights the great strides in the Electricity sector, which is essential for powering economic activity. Commendable progress has been made in the generation and transmission of electricity in India. The total installed capacity has increased from 3,56,100 MW in March-2019 to 3,70,106 MW in March 2020.

Further, the generation capacity increased to 3,73,436 MW in October-2020 and comprised of 2,31,321 MW of thermal, 45,699 MW of hydro, 6,780 MW of nuclear, and 89,636 MW of renewables and others. Further, the country has already accomplished two major landmarks in rural electrification arena namely: 100 per cent village electrification under Deen Dayal Upadhyaya Gram Joyti Yojana, and Universal household electrification under Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhaagya). 

India is witnessing rapid urbanisation.  According to Census 2011, India’s urban population was 37.7 crores, which is projected to grow to about 60 crores by 2030.

The survey points that Pradhan Mantri Awas Yojana-Urban (PMAY-U) has been rapidly moving towards achieving the vision for providing a pucca house to every household by 2022. It has so far approved more than 109 lakh houses of which over 70 lakh houses have been grounded for construction.  

More than 41 lakh houses have been completed and delivered. The Government of India has made additional outlay of Rs. 18,000 crore for the year FY21 through budgetary allocation and extra budgetary resources for the scheme under Atmanirbhar Bharat 3.0. Further, a sub scheme Affordable Rental Housing Complexes (ARHCs) under PMAY-U has been initiated to address the needs of the migrant workers for decent rental housing at affordable rate near their work places.  

The Economic Survey has highlighted the relevance of continued need for strong fiscal support, incentives to manufacturing infrastructure sector, public private partnerships in appropriate areas and process reforms to further boost all round economic development.