Talking Point: Infra sector seeks higher allocation, tax breaks

“Over the last few years, the government has been trying to address the impediments to the infrastructure growth story. However, investment in the sector is yet to reach the desired level,” Vishwas Udgirkar, Partner, Consulting, Deloitte Touche Tohmatsu India, said. “Budgetary allocations are expected to increase and with bank capitalisation taking place due to demonetisation, it would be interesting to see if any announcements are made to facilitate channelising this much needed capital to the sector.” 

According to Manish Agarwal, Partner Leader Infrastructure with PwC, public sector spending is expected to remain the prime driver for infrastructure build-out over the next year as private sector investment remains subdued. “Financial stress in the banking system remains a key hurdle to private investment coming back into the sector. Addressing this, along with implementation of Kelkar Committee recommendations, could revive PPPs (public private partnerships) faster,” Agarwal said.

On the merger of the Railway Budget with the Union Budget, Agarwal noted that the move will help to bring in more focus on the key issues relevant to the budget. “The Finance Ministry will be able to start taking a view on allocation between rail, road, water to optimise logistics costs, and make transport greener,” Agarwal said. “While road and rail are likely to get large allocations, we expect to see growth in allocation to inland waterways and Sagarmala programmes.” 

The provisions for attracting global funds such as pension funds and sovereign wealth funds would go a long way in facilitating infrastructure development, said Jaijit Bhattacharya, Partner, Strategy and Economics, KPMG in India. “Along with an increase in budgetary allocation for the infrastructure sector, it is crucial to establish regulatory mechanisms in infrastructure creation, which enables private investment in infrastructure funds such as National Investment and Infrastructure Fund (NIIF),” he said. 

“In addition, a more aggressive adoption of asset recycling is desirable as it would free up a very significant amount of funds which can be further invested into more infrastructure,” he added.