By:- Manish Sharma, Sector Leader – Infrastructure, Transport and Logistics, PwC India
After more than 30% increase in capex between FY23 and FY25, the budget has now settled down to a modest growth of around 11% in FY26 and now to 9% for FY27. The emphasis is now shifting towards enabling better execution. Launch of initiatives like partial credit guarantee mechanism is one such intervention, where large number of new project developers are entering into PPP opportunities, with likelihood of user charge-based PPP projects like toll roads gaining traction, this could increase the risk profile for lenders and impact financial closures. Therefore, credit guarantee mechanisms should address the concerns of lenders, however, these mechanisms need to work before the default and not after a default has occurred. Setting up seven new high speed rail corridors and DFCs is another welcome step, however, launching these developments need to be tied down to iron clad, irrevocable state government commitments on aspects like land, first and last mile access arrangements, and security to ensure timebound execution.
REITs for surplus CPSE lands is a long overdue intervention and, if effectively implemented, it could lead to a significant asset monetisation opportunity. The focus on creating a domestic capability in construction and infrastructure equipment and container manufacturing is a positive move to address the vulnerability which supply chain disruptions can cause to the country’s infrastructure and trade agenda. Finally, the creation of City Economic Regions is a welcome step to check the unplanned and uncontrolled proliferation of Tier 2 and 3 cities and, capitalise on the economic opportunities they present, though this will require reforms to happen in tandem with creation of CERs, inclusion of peri-urban regions in municipal limits, recognising industrial clusters as an integral part of city planning, and extending reliable and quality municipal services to such regions.