Higher outlay for roads to push ongoing projects; pvt funds to pave a new path

The 2.7% hike in the budgetary allocation for road transport and highways, though small, comes on a high base and will be committed towards ongoing projects, while the fresh developments will come in from the private sector as envisaged by the government, say experts.

The interim budget presented by finance minister Nirmala Sitharaman on Thursday allocated ₹2.78 lakh crore for roads, transport and highways as against ₹2.70 lakh crore allocated in FY24, revised subsequently to ₹2.76 lakh crore.

Vinayak Chatterjee, founder of The Infravision Foundation, said the increase in road sector allocation, while small, is in line with the overall carry-on nature of the increase in infrastructure allocation.


"With NHAI constrained to raise further debt, the full final budget is expected to increase outlays substantially more as the government rides on economic growth on the back of robust infrastructure creation," Chatterjee said.

Jagannarayan Padmanabhan, senior director at CRISIL Market Intelligence and Analytics, added that the low increase in budgetary allocation to the road sector comes on a high base and most of it is a committed outlay for existing projects.

"Going forward, the government's focus will be on new projects on build-operate-transfer (BOT) and public-private-partnership (PPP) mode to get private sector investment," he said, adding, even the asset monetisation will continue to play an important role for the government to raise capital.

The government aims to bid out 54 road projects worth over ₹2.2 lakh crore, covering a length of 5,200 km on the BOT model and will soon modify the model concession agreement to attract private investment into the sector. The ministry has already invited bids for seven projects with a length of 387 km worth ₹27,000 crore.

The cost of construction material has seen a 6% increase in one year, and hence, experts say, the real hike in capex is not more than 5%, which is not enough to push economic growth to levels beyond 7%.

The government is committed to reduce travel time, enhance travel experience and bring down logistics costs in the country. Sitharaman announced an increase of 11.1% in the infrastructure expenditure at ₹11,11,111 crore against a budgetary allocation of ₹10 lakh crore in 2023-24, ₹7.5 lakh crore in 2022-23 and ₹5.54 lakh crore in 2021-22.

The government estimates that infrastructure expenditure has a multiplier effect of 2.45 on GDP in the year of capital expenditure and 3.14 in the next.