The budget focuses on ways to improve project preparation and attract investment, both domestic and foreign, in infrastructure.
V. Senthilkumar Managing Director, Propel Industries As the government aspires to grow Indian economy to $5 trillion by 2025, how do you look at the Union Budget 2022 – 23 unlocking opportunities for
– V. Senthilkumar
Managing Director, Propel Industries
As the government aspires to grow Indian economy to $5 trillion by 2025, how do you look at the Union Budget 2022 – 23 unlocking opportunities for India’s CE industry?
The Union Buget 2022 is a positive step ahead in the government’s long term vision of making India a $5 trillion economy by 2025. This vision will require a spending of around $1.4 trillion for infrastructure in the same period. The National Infrastructure Project (NIP) has been expanded to cover 9000 projects covering 34 infrastructure sectors and is following a coordinated technology driven approach involving all stakeholders. This auger well for the long term prospects of the CE industry, there will be a steady increase in demand for construction equipment and the industry is poised for tremendous growth. The key however will be good implementation; India fell short of targets in the first 3 years of the NIP calendar. But given the government’s strong focus on infrastructure as an engine for overall growth of the economy we are confident that the path ahead is very bright for the CE industry in India.
How do you think this budget will help in pushing investments in the infrastructure, construction and mining space especially after a stagnant period of the Covid-19 pandemic?
The proposed push on infrastructure through the PM Gati Shakti scheme and a significant increase on capital spend budget will have a positive impact on the infrastructure, construction and mining industries. The massive hike in public investment proposed by the budget will help revive corporate investments too. For FY23, states have been allocated additional 1 lakh crores and this will help in fuelling investments to local companies.
Allocation of Rs 48,000 crore to the PMAY will give impetus to affordable housing and benefit the construction industry. The budget also focuses on ways to improve project preparation and attract investment, both domestic and foreign in infrastructure. The Centre has approved continuation of and revamping of the Scheme for Financial Support to Public Private Partnerships (PPPs) in Infrastructure Viability Gap Funding (VGF) Scheme till 2024-25. This is expected to attract more PPP projects and will increase private investment in key areas.
The finance Minister, in her budget speech, has stated that National highways in India will be expanded by 25,000 km during 2022-23. What is the impact of this on the CE sector in terms of skilled employment as well as from business generation?
The budget proposes an extension of the national highways network by 25,000 km, with an outlay of Rs. 20,000 crores via financing. According to various estimates, the National Highways Authority of India (NHAI) has the total capital expenditure target of close to Rs 7 lakh crore to develop roads, multi modal logistic parks, ropeways and intermodal stations between FY22 and FY24. NHAI would award highway projects worth close to Rs 6 lakh crore by FY24.
This will have a huge impact on the CE sector, resulting in direct increase in business and confidence to embark on long term investments. The CE sector will also benefit from the overall goal of this infrastructure push which is to reduce the cost of logistics from 14% of GDP to 8% of GDP which is the global average. This will help increase the profit margins and provide competitive advantage in the global market.
The government’s sustained focus on infrastructure is also giving the CE industry the confidence to earmark funds for employee skill building. This is a sector which needs skilled labour for growth and the promise of huge spending by the government on infrastructure will help the CE industry to focus on skill building and up skilling of its employees. Government of India under the National Skill Development Corporation has also introduced various programs supporting and encouraging skill development. This coupled with private skill development initiatives will help the sector achieve higher productivity and efficiency.
What do you think are the present challenges and the road ahead for CE industry?
At present, the major issue faced by the CE industry is the high price of steel and other raw materials, adversely impacting the profit margins and global competitiveness of the industry. The 2022 budget’s extension of the exemption of duty on import of steel scrap and revocation of anti-dumping and countervailing duty on specified steel products are welcome moves. But the government needs to do more to ensure that raw material prices are kept in check.
Overall the road ahead is bright for the CE industry and it has shown remarkable resilience to bounce back from the effects of the Covid pandemic.
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