National Infrastructure Pipeline

IN NEWS:

• The Union Cabinet is likely to consider a proposal to infuse Rs. 6,000 crore into the National Investment and Infrastructure Fund (NIIF), a move which will help the entity raise Rs. 1.1 lakh crores over the next five years to finance infrastructure projects under the national infrastructure pipeline.

NATIONAL INFRASTRUCTURE PIPELINE

• To achieve the GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion over these years on infrastructure. 
• To achieve this objective, a Task Force chaired by Atanu Chakravarthy was constituted to draw up the National Infrastructure Pipeline (NIP) for each of the years from FY 2019-20 to FY 2024-25.
• The task force in its initial report had projected investment of Rs. 102 lakh crores, but the final report is projecting a total infrastructure investment of Rs. 111 lakh crores.

SECTOR-WISE BREAK-UP OF NIP:

• The Centre (39%) and state (40%) are expected to have almost equal share in implementing the NIP in India, followed by the private sector (21%).
• During the fiscals 2020 to 2025, sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to ~71% of the projected infrastructure investments in India.

• Out of the total NIP of Rs 111 lakh crore, Rs 44 lakh crore (40%) worth of projects are under implementation, Rs 34 lakh crore (30%) worth of projects are at the conceptualisation stage, and Rs 22 lakh crore (20%) worth of projects are under development.

REFORMS SUGGESTED UNDER NIP:

• Improving project preparation processes: Project preparation processes such as planning and design are critical steps in creation and efficient implementation of bankable infrastructure projects.
• Enhancing execution capacity of private sector participants: For enabling robust private sector participation in infrastructure sector, it is critical to have a deep pool of experienced developers with required competence and execution capacity. Collaborations and joint ventures with strong global infrastructure developers must be facilitated to build domestic capacity.
• Robust enabling environment: An effective environment comprising of robust policy framework and public institutional capacity is needed. This will help improve private sector participation through well-framed contractual agreements with optimal risk allocation, and honouring of the contracts entered.
• Financial sector reforms:
  • Revitalising the bond and credit markets
  • Strengthening the municipal bond market in India
  • Revitalising asset monetization
  • Enabling user charges to finance infrastructure
  • Long-term financing landscape
• Institutionalising dispute resolution mechanism to efficiently resolve disputes related to PPP projects.
• Improving capacity development of project execution agencies: The capacity of public institutions to plan, prepare and deliver infrastructure projects on schedule is key to effective infrastructure development.
• Strengthening infrastructure quality
• Promoting competition: In order to promote a culture of competition in the country, we need to establish an anti-trust resolution mechanism, improve collaboration between the Competition Commission of India (CCI) and sector regulators to address competition-related concerns and operationalisation of the National Competition Policy 2011.
• Strengthen performance monitoring and evaluation systems

NEED:

• Meet the ambitious $5 trillion target: It is estimated that India would need to spend $4.51 trillion on infrastructure by 2030 to realize the vision of a $5 trillion economy by 2025, and to continue on an escalated trajectory until 2030. The endeavor of the NIP would be to make this happen in an efficient manner.
• Rapid urbanization: it is estimated that around 42% of India’s population would be urbanised from 31% in 2011. By 2030, it is estimated that five states in India – Tamil Nadu, Gujarat, Maharashtra, Karnataka and Punjab will have more than 50% urbanisation. Also, the number of metropolitan cities in India are estimated to increase from 46 as per Census 2011 to 68 in 2030. Plugging the deficiency in infrastructure will smoothen the process of urbanisation by promoting ease of living and facilitating economic activity. It will thus help in realising the full potential of a growing urban economy and raise its contribution to GDP.

• Reap potentials from a favourable demography: It is expected that the working-age population of India will grow 1.2x times in the period 2015-2030. India is expected to have the world’s largest working-age population of 1.03 billion (~68% of the population) by 2030. By 2030, India will have a median age of 31 years versus China – 43 years and the US – 40 years. This will be an important growth booster.

• Facilitate economic transition: As of 2018, India’s GDP was $2.6 trillion with 54% share of services, 31% share of industry and 15% share of agriculture. By 2030, it is estimated that the share of services sector in India’s GDP will be 58%, the share of industry sector will be 34%, and the share of agriculture sector will decline to 8%. These trends are reflective of India’s economy gradually transitioning from an agrarian economy to a service-centric economy.
• Rising energy demand: As more people demand greater levels of energy to fuel consumption, there are challenges of supply, sufficiency and sustainability. Infrastructure must support this growth, but should do so responsibly
• Rising demand for fresh water: Already, 20% of the population lacks clean drinking water and 40% lacks basic sanitation. As this global divide becomes even more acute, it will drive radical changes in awareness and behaviour around water usage and management, and the energy intensity of our consumption. Infrastructure is vital in addressing this challenge.
• Meet challenges relates to social infrastructure: In a rapidly urbanizing environment, infrastructure will determine their quality of life. Hence, investments are vital to address challenges like like financing the cost of more people living longer and having fewer children.
• Develop resilience: Resilient infrastructure is critical for peoples’ well-being, quality of life, and economic prospects. At a macro level, physical infrastructure underpins the achievement of all 17 Sustainable Development Goals (SDGs).

PRACTICE QUESTION:

Q. ‘Investing in infrastructure is vital for India to achieve its ambitious targets in the coming years’. Discuss with special reference to National infrastructure pipeline?