India needs policy, regulatory reforms to support infra investments

India needs policy and regulatory reforms to support infrastructure investments across sectors such as healthcare, transport and logistics, digital infrastructure and energy amid the coronavirus-induced crisis, a report said on Tuesday.

Stating that prioritising the infrastructure and allied activities to kick-start the economy is a way forward, global consultancy firm KPMG in its report said infrastructure spending can help spur economic activity and the involuntarily unemployed through job creation.

“As India faces its deepest recession since independence, infrastructure spending can help spur economic activity and the involuntarily unemployed through job creation,” the report ”Catalysing the National Infrastructure Pipeline – Project India,” said.

It added that the USD 1.5-trillion (Rs 111 lakh crore) National Infrastructure Pipeline (NIP) built on Infrastructure Vision 2025 should provide a timely stimulus to the economy.

Infrastructure Vision 2025 is the cornerstone of India”s infrastructure policy and is principally meant to improve the ease of living in India. To streamline project implementation and facilitate investments, the government has integrated various infrastructure projects under the programme.

To achieve the programme”s goals, the government has also announced NIP projects worth USD 1.5 trillion over 2020-25.

The NIP task force has set an ambitious investment target of USD 1.5 trillion over fiscal years 2020-25 for the creation of reliable infrastructure with the objective of boosting economic growth.

The task force presented its final report to Finance Minister Nirmala Sitharaman on April 29, according to KPMG.

Infrastructure spending is expected to have a multiplier effect on overall economic growth, KPMG said in its report. It added that improved infrastructure will also enhance the overall productive capacity of the economy and its global competitiveness.

Arun Kumar, chairman and CEO, KPMG India, said, “Given the magnitude of the COVID-19-pandemic and consequent pressure on resources, it is imperative that stakeholders reassess the priority of sectors and projects outlined in Infrastructure Vision 2025.”

He added that typically, infrastructure projects are characterised by high capital intensity and long-gestation periods, often leading to a funding gap.

The report said the government should take stock of the project pipeline and review its expenditure and financing programmes to obtain optimal results and impacts. It added that closing the infrastructure funding gap calls for developing financing solutions and placing more emphasis on collaboration and shared responsibilities across public, private and non-governmental organisations.

“Public investment is key to filling this gap. A prerequisite to this is an enabling governance and policy framework that fosters business growth and investor confidence while rethinking innovative investment and funding models to encourage private sector participation,” he added.

India needs policy and regulatory reforms to support infrastructure investments across sectors such as healthcare, transport and logistics, digital infrastructure, energy and agriculture, it said.

“The disruptions caused by COVID-19 have highlighted the criticality of fundamentally rethinking many aspects of human endeavour.

“Investments in infrastructure have a multilayered spillover impact on the economy, affecting overall growth as well as the prospects of businesses and individuals,” said Elias George, partner and head (infrastructure, government and healthcare, KPMG in India.

The report examines India”s infrastructure needs driven by rapid urbanisation and the impact of COVID-19 on India”s Infrastructure Vision 2025 and its goals, he said.

“In essence, robust infrastructure is a prerequisite to achieve the goal of becoming a USD 5 trillion economy by FY2025, as it offers a well-acknowledged economic and social multiplier effect in enabling economic prosperity. At a time when COVID-19 has ravaged the economy and livelihoods, the NIP offers the opportunity to create significant impacts,” said the report.

The KPMG report also said the ambitious vision for infrastructure must, however, be revisited in the context of the COVID-19 pandemic.

“Greater public-private collaboration in infrastructure delivery will be needed in a post-COVID-19 scenario. The government will have to evaluate the pandemic”s impact across sectors and reassess the priorities of the NIP”s themes and projects,” the report said.

The report added that it could consider reprioritising essential sectors and projects given their higher socio-economic impact. PTI