Populist or Popular?: Budget 2018 does a balancing act between social and infrastructure development

Budget 2018 does a balancing act between social and infrastructure development

Budget 2018 is certainly a special one since it is the last one to be presented by the current government before the elections in 2019. The government has to a large extent set a populist mood with its announcements focused mainly on the health and agricultural sectors, and medium- and small-scale  enterprises. Nonetheless, infrastructure sectors continued to garner attention – railways and roads being the major beneficiaries with allocation at an all-time high. This year’s budget also reaffirms the focus on high-investment government programmes such as Bharatmala, the Smart Cities Mission, the Regional Connectivity Scheme (RCS), and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). The government now aims to consolidate the gains expected from these big initiatives.

Overall, the macroeconomic sentiment seems to be improving. Growth, however, has been slow despite remarkable resilience to structural reforms. The goods and services tax (GST), demonetisation, digitisation, and bank recapitalisation were the buzzwords during the past four years of the government in power. The Ministry of Finance (MoF) expects India to grow at 7.2-7.5 per cent during the second half of 2017-18.

Indian Infrastructure gives a snapshot of key budget proposals across infrastructure sectors…

Money matters…

The finance minister laid emphasis on big numbers during his budget speech. A total of about Rs 50 trillion is required to increase GDP and connect the country with a network of roads, airports, railways, ports and inland waterways. An allocation of Rs 5.97 trillion has been made for 2018-19 against an estimated expenditure of Rs 4.94 trillion during 2017-18.


Capex for the railways has been pegged at Rs 1.48 trillion for 2018-19. The sector has received a major thrust from the government as 600 stations have been identified for upgradation by Indian Railways. All railway stations with more than 25,000 footfalls will have escalators. Such upgrades will undoubtedly help move people faster and make the entire travelling experience more convenient.

According to industry experts, with the huge capex allocated to the sector, the railways is likely to become one of the key drivers of economic growth in the country. The majority of this corpus will be allocated towards strengthening the railway network and enhancing its carrying capacity, while also focusing on safety. This will not only boost the transport industry, but also create opportunities for ancillary industries.

The government has accorded the highest priority to safety and has planned a total expenditure of Rs 730.65 billion (budget estimates) in 2018-19, including allocations made under the Rashtriya Rail Sanraksha Kosh. The expenditure for the same stood at Rs 687.25 billion (revised estimates) in 2017-18.

The most laudable inclusion in the budget has been the government’s focus on improving suburban train systems in the metros, especially Mumbai, where an investment of Rs 110 billion has been planned for network expansion works and an additional Rs 400 billion for a new suburban network in the city. Besides, a 160 km suburban rail network, worth Rs 170 billion, has been planned for Bengaluru.

Roads and highways

In line with the previous two budgets, the road sector has attracted substantial attention this time as well. The central government has allocated funds amounting to Rs 710 billion to the Ministry of Road Transport and Highways (MoRTH) under Union Budget 2018, an increase of 9.39 per cent over the Rs 649 billion allocated during 2017-18. The National Highways Authority of India (NHAI) has been allocated

Rs 296.63 billion (an increase of 24.16 per cent over the previous year) while Rs 408.95 billion has been allocated for road and bridge works (an increase of 0.65 per cent over the previous year). In addition, Rs 3.15 billion has been allocated for road transport and safety.

In a major development, the government has approved the construction of 35,000 km of roads at an estimated cost of Rs 5.35 trillion. The finance minister recognised this as a big boost to connectivity. The announcement of constructing 9,000 km of national highways is expected to further augment the opportunity basket.

The government has made several attempts to reduce the sector’s dependence on budgetary allocations. In order to raise equity from the market for its mature assets, NHAI will also consider organising its road assets into special purpose vehicles. The budget also recognises the importance of infrastructure investment trusts. Further, the central government plans to introduce the policy of “pay as you use” for highway toll payments in the near future.

Ports and shipping

The Ministry of Shipping has received an allocation of Rs 18.81 billion (budget estimates). The allocation is higher than the budget estimate of Rs 17.73 billion and revised estimate of Rs 15.68 billion for 2017-18. Of the total allocation in 2018-19, Rs 6 billion has been allocated for the Sagarmala programme, Rs 5.08 billion for inland water transport, Rs 3.23 billion for the development of ports, and Rs 305 million for shipping and shipbuilding, among others.



The central government has announced a slew of reforms to spearhead 5G technology and domestic manufacturing in the telecom sector under the budget. It has doubled the allocation for the Digital India programme to Rs 30.73 billion in 2018-19. In addition, the government has allocated a sum of Rs 100 billion for the installation of 500,000 hotspots which will provide broadband to approximately 50 million Indians. The government has increased basic customs duty on handsets to 20 per cent and also imposed a 15 per cent duty on some components. It will support the establishment of a 5G test bed in collaboration with the Indian Institute of Technology Madras. However, telecom operators are deeply disappointed over the fact that no major relief has been announced for the sector.

Civil aviation

The Ministry of Civil Aviation has been allocated funds to the tune of Rs 66.02 billion for 2018-19. Funds totalling Rs 10.14 billion have been earmarked for the revival of 50 airports and for the provision of viability gap funding under the RCS. This allocation for RCS for the next fiscal year is a steep increase from the Rs 2 billion allocated for 2017-18. However, the allocation made to the Airports Authority of India (AAI) has decreased to Rs 0.73 billion from the Rs 1.5 billion provided in 2017-18. The Directorate General of Civil Aviation and the Bureau of Civil Aviation Security received allocations of Rs 2.1 billion and Rs 0.7 billion respectively. Meanwhile, an amount of Rs 6.5 billion has been allocated for state carrier Air India, which is undergoing divestment. A new scheme – NextGen Airports for Bharat [NABH] Nirman – has been proposed to expand the existing airport capacity by more than five times so as to handle a billion passengers annually. The scheme entails investments to be made in airport upgradation works by both the private sector and AAI. Under the scheme, 100 airports will be established in 15 years at an estimated investment of Rs 4 trillion, of which a large percentage of the investment will come from the private sector. Meanwhile, AAI plans to double the outlay on airport infrastructure to

Rs 41 billion for fiscal year 2018-19 and further plans to invest Rs 250 billion in airport infrastructure over the next three to four years.


The central government has allocated Rs 150.47 billion worth of funds to the Ministry of Power under the budget, an increase of 8.39 per cent over the Rs 138.81 billion allocated during the previous budget . The allocation to central sector schemes registered an increase of 7.98 per cent from Rs 122.77 billion in 2017-18 to Rs 132.57 billion in the current budget. In addition to funds allocated to the power ministry, funds amounting to Rs 542.7 billion have been allocated to public enterprises in the power sector, a decline of 13.3 per cent over the Rs 626 billion allocated in 2017-18.

The thrust towards ensuring 24×7 electricity access to all rural households under the Saubhagya scheme and the Deen Dayal Upadhyaya Gram Jyoti Yojana schemes is likely to provide a boost to energy demand to some extent, besides improving the quality of life for rural households.


The Ministry of Coal has been allocated funds to the tune of Rs 7.7 billion, an increase of 3.35 per cent over the Rs 7.45 billion allocated in 2017-18.



Renewable energy

Budget 2018 for the renewable energy sector fell short of meeting industry expectations. Even though the Ministry of New and Renewable Energy (MNRE) had released a new trajectory to achieve its targets of commissioning 175 GW of renewable energy by 2022 in November 2017, the funds allocated for renewable energy expansion do not seem sufficient to complement the planned capacity addition.

The overall budget allocation for the MNRE for 2018-19 is Rs 51.46 billion, which is a slight decrease from the Rs 54.73 billion allocated in the previous budget. While the budget allocation for all grid-interactive renewable power has been set at Rs 37.63 billion, which is a 6 per cent decrease from 2017-18, the current budget allocation for off-grid/distributed and decentralised renewable power has increased by almost 13 per cent in comparison with the previous year. Although this shows the government’s growing focus on rural electrification, the funding seems inadequate for the numerous ongoing and proposed schemes. The budget also announced an innovative scheme to accelerate solar water pump installations by farmers. The government will be taking the necessary measures to encourage distribution companies to purchase the excess solar power generated by the farmers while harvesting the sun’s energy for solar pumps.

Oil and gas

The government has proposed an expenditure of Rs 311.01 billion (budget estimates) for the Ministry of Petroleum and Natural Gas during fiscal year 2018-19, an increase of

Rs 19.44 billion from the Rs 291.57 billion (budget estimates) that was proposed for the preceding fiscal year. The revised estimate for 2017-18 stands at Rs 331.95 billion. Of the total proposed expenditure, Rs 310.13 billion has been proposed for central sector schemes split as follows – payment of differential royalty to state governments Rs 23.25 billion; total strategic oil reserves Rs 7.81 billion; total LPG subsidy Rs 203.77 billion; total kerosene subsidy Rs 45.55 billion; the Phulpur-Dhamra-Haldia pipeline project Rs 16.74 billion; and the National Seismic Programme Rs 13 billion. The balance has been allocated to the secretariat (Rs 0.32 billion) and autonomous bodies (Rs 0.55 billion).

Water supply and sanitation

The government has announced a central outlay of Rs 417.65 billion for the Ministry of Housing and Urban Affairs (MoHUA) under the 2018 budget. Of the total outlay, while

Rs 253.49 billion (60.7 per cent) has been allocated towards capital expenditure, the MoHUA has received Rs 164.15 billion (39.3 per cent) to meet its revenue expenditure for the 2018-19 fiscal year. The outlay for 2018-19 is marginally higher than the previous year’s planned budget outlay of Rs 406.17 billion (2.83 per cent) and revised outlay of Rs 407.53 billion (2.48 per cent) for 2017-18.

For the Swachh Bharat Mission (Urban), the government has allocated Rs 25 billion, which is about 9 per cent higher than the budget and revised estimates of Rs 23 billion for 2017-18. Besides, Rs 121.69 billion has been earmarked for the MoHUA’s Urban Rejuvenation Mission. This is significantly higher than the 2017-18 planned and revised estimates of Rs 90 billion and Rs 89.98 billion, respectively, for the mission. For the upcoming fiscal year, about 49.3 per cent of this allocation (Rs 60 billion) has been set aside for AMRUT. The remaining Rs 61.69 billion has been allocated to the Smart Cities Mission.

A leap of faith

The finance minister is of the view that the government’s journey so far has been challenging but rewarding. The government believes that the economy will grow at a rate of about 8 per cent as a result of all its big-ticket initiatives. However, many of the positive features in the budget lack clarity in terms of actual implementation. For instance, even though the budget notably encourages discoms to purchase the excess solar power generated by farmers, it fails to identify how the financially distressed discoms would be able to offtake this large amount of variable power. The fiscal state of affairs will make a huge difference in shaping the progress of these budget announcements. The government is currently grappling with issues such as a hole in the accounts, anaemic tax collections post rate cuts under GST, and cuts in excise on petrol and diesel. The trouble has been further exacerbated by slow growth in agriculture and exports. As a result, the limited resources need to be put to optimal use to set things in motion. Overall, the economic reform measures, facilitating the ease of doing business and the impetus to the social sector are steps in the right direction for long-term growth of the Indian economy.