Samata Dhawade, Vice President, Aditya Birla Management Corporation
Does India have the wherewithal to support infrastructure spending through public financing over the next five years?
I am very sure that past investments and better connectivity are going to help reduce the logistic costs and increase connectivity on pan-India basis. These, coupled with government-focused and innovative approaches to raise funds, will enable awarding of future projects. Interestingly, the government now has a special division for logistics under the Ministry of Commerce. So, the integrated logistic policy and approach will support future infrastructure investment plans and logistic solutions.
Instruments, such as bonds and InvITs, market capitalisation continues to remain a challenge...
Yes, the funding instruments have not recorded encouraging and desired results yet. Besides, infrastructure investment will be impacted by the growth prospects looking equally worrisome. The requirement for funds are huge. It is estimated that the cumulative figure for India's infrastructure investment gap would be around $526 billion by 2040. Increasing involvement of foreign capital can be the way forward.
How are tax collection and trends in GST likely to hit the government's envisaged spending plans?
GST collection has been lower than its targets. The budget estimate of GST collections for FY19 is Rs 13.48 trillion, with a monthly target of Rs 1.12 trillion. However, the actual collection has been on an average of Rs 900 billion per month. The collection crossed Re 1 trillion only thrice since its implementation. Lower GST collection will exert pressure on the fiscal scenario, and hence restrain the spending on infrastructure.
Subsequently, has the current government been able to achieve its capex target?
Capex has been a challenge, impacting the infrastructure projects. Among the various infrastructure projects, roads and railways have seen the maximum traction during the last couple of years. In fact, among the major 15 infrastructure schemes of the government, barring three almost all others have either recorded higher budgetary expenditure or at least close to the outlays during FY19.
So, in terms of actual expenditure, the government has been able to continue with its thrust. However, it should be noted that these projects are largely funded through the PPP model, where the bigger challenge for the private players has been raising funds and getting financial closures for the projects. Further, it has aggravated with liquidity challenges with NBFC financial crisis. Innovative funding and partnership models like the Hybrid Annuity model (HAM) have enabled implementation of road projects much faster. These new approaches have managed to mitigate the risks and incentivise the private players.
Even the NHAI funding requirement is increasing, as the awarding of the projects under HAM and on-cash contract basis is increasing. NHAI has been relying more on external borrowings, such as Masala bonds, borrowings from Life insurance Corporation of India (LIC), and Employees' Provident Fund Organisation (EPFO), and monetisation of road assets through the toll-operate-transfer (TOT) route. So NHAI's capability to raise funds will be very important for the road sector, going ahead.
Lastly, 108 economists allege that economic statistics in India are in shambles. They were mainly targeting the revision in GDP numbers. Considering the state of confusion, which GDP growth numbers should be considered?
There is a strong debate over the reliability of the GDP numbers in India. The discrepancy is very high, if we compare the GDP numbers with high frequency data, like IIP, trade data, or corporate results. I think, clear communication on the methodology and calculation of the deflators will be very important in reducing ambiguity.