Page 71 - Nuvama | IC Report 2023

INDIA: THE 5D ADVANTAGE

Vietnam, China and Bangladesh. To be fair, India has made efforts in the past to plug logistical and
infrastructure gaps. In 2000s, the private sector took the lead in building power capacity, roads and India’s private
ports, but the cycle proved to be short-lived. When the global tide of liquidity turned adverse and sector took the
the Indian economy slowed, many of these projects became unviable, leaving the banking system lead in building
saddled with NPAs. In contrast,in Asian economies, infrastructure was heavily supported directly and power capacity, roads
indirectly by the government sector, i.e. large infra projects, which have long gestation. Productivity at and ports during
2000s, but the cycle
the economy level was a more important consideration than profitability at the project level.
was short-lived
In this regard, the government activism seen in India pertaining to infrastructure over the last few
years is quite welcome. Policymakers have undertaken tough economic reforms (refer to Deregulation
section) in a host of areas, both to mobilise resources and push infrastructure. For example, the
government has worked hard to improve efficiency in tax collections and spending, which is creating
more fiscal space to directly support infrastructure spending. For the next five years, the government
has laid out the National Infrastructure Pipeline (NIP) with a plan to double infrastructure capex.
National Infrastructure Pipeline: Capex to double in five years

Under the NIP, the government plans to spend nearly INR100tn on infrastructure over FY20–25E
(~2x FY14–19 investments). These investments would be spread across several areas of public Under the NIP,
infrastructure with a special focus on transportation. Simultaneously, the government has laid out an the government
asset monetisation plan (National Monetisation Pipeline), which would unlock financial resources by plans to spend
nearly INR100tn on
monetising existing assets. The proceeds thereof would be utilised fund fresh infrastructure projects infrastructure over
under the NIP. This should help bridge India’s infrastructure deficit. Surely, the pandemic of the last two FY20–25E
years has slowed the whole process for obvious reasons, but the momentum is now picking up again. (~2x of FY14–19
investments)

Transportation 34%
Exhibit 2:
Energy and power 24% National
Infrastructure
Pipeline
Urban infrastructure 16% breakdown
Rural infrastructure 17%

Others 9%

Source: Government documents

Revamping railways – Across the board

One of the main reasons for India’s infrastructure deficit has been its weak railway network. Its capacity
has expanded little since indepence. Bizzare isn’t it since railways are capable of hauling goods at
higher speeds and at much lower cost—better logistical efficiency? That said, investments in this
mode of transport are now getting back on track. First off, network capacity has risen in recent years

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