Gati Shakti: Govt intends to power up economic recovery via infra building

The government’s national master plan of Gati Shakti could all be about speeding up economic recovery through infrastructure (infra) building.

Gati, the Hindi word for speed, could bring in economic power (Shakti) since the ambitious Rs 113-trillion plan of the government could generate demand for a host of other sectors, including cement, metal, and power, and more importantly, generate employment.

This investment is also crucial for creating hospital, school, and other social infra that form the very fabric of the national infrastructure pipeline (NIP) identified by a government taskforce. The government is expected to add speed to the creation of health infra since the second wave of Covid-19 underscored the need for central and state investment in it.

Infra investment acts as a bulwark for further investment in the economy. The US Senate, for instance, last Tuesday approved Joe Biden's $1.2-trillion infra Bill, paving the way for not only a major political victory for the US President, but also stepping up economic revival.

More than 70 per cent investment in Gati Shakti will, however, have to come from the government, even though the plan is to leverage private sector capital and efficiencies in the overall infra creation. 
 

Gross domestic product projections, however, have a bearing on the viability of infra projects. Besides, the fiscal position of states and the Centre limit their funding capability. With some private sector companies, especially those in the power business, reaching the end of debt deleverage, capital expenditure in renewable energy is expected to pick up. 

Similarly, the national highway construction is expected to rely more on private and institutional investment since the National Highways Authority of India is over-leveraged.

According to a recent CRISIL Ratings report, a strong order book and improved project execution, supported by the central government’s thrust on infra spending, will help large and diversified engineering, procurement, and construction (EPC) companies rebound with a revenue growth of over 20 per cent this fiscal year (2021-22).

“While operating margins may moderate slightly due to higher cost of inputs, particularly steel, an improvement in the working capital position and strong balance sheets should support credit profiles,” it said in a study of eight large and diversified EPC companies, which are into civil infra, transportation, power, and oil and gas, among others, with an aggregate revenue of Rs 1.5 trillion.

The companies had logged aggregate revenue declines of 4 per cent and 6 per cent in 2019-20 and 2020-21, respectively, because of weak economic growth and the Covid-19 pandemic, said the CRISIL report.

A host of projects have been offered on the India investment grid to provide visibility to them and help in their financing with prospective investors. This would mean the share of the private sector in spending could change, depending upon the attractiveness of projects. 

A committee for NIP, which may be subsumed or christened Gati Shakti, monitors the NIP progress and eliminates delays. Besides, a steering committee at the infra ministry-level follows up on implementation. There is also a committee that monitors raising financial resources for the NIP.

The focus would be to connect underdeveloped areas as well. “Be it East India, the Northeast, Jammu & Kashmir, Ladakh, including the entire Himalayan region, or the coastal belt or tribal areas, these regions are going to turn into a major foundation for India's development journey,” said Prime Minister Narendra Modi at his Independence Day speech.

“All villages should have roads. All households should have bank accounts. All beneficiaries should have Ayushman Bharat cards. All eligible persons should get the benefit of Ujjwala Yojana and have household gas connections. We have to connect every entitled person with the government’s insurance, pension, and housing schemes. We have to move ahead with a mindset of cent per cent achievement,” he said in his address.