The Union Budget has set the tone for ‘building’ a New India by pushing a plethora of infrastructure projects
The Union Budget 2019 has promised to be a proposal for building a ‘New India’ and propel the economy to the $5 trillion marks. The Finance Minister has delivered on her word, of the Budget is a growth-focused one. She has allocated Rs 100 lakh crore for the development of infrastructure to achieve this goal. The government has also announced an increased allocation for phase-III of the Pradhan Mantri Gram Sadak Yojana, under which it aims to build 1.25 lakh km of village roads using green technology. Through the Budget, the highways and railways have received the much-needed boost to improve the logistics of the country.
The Finance Minister has addressed the importance of the Public-Private Partnership (PPP) model, especially with respect to Indian Railways. The government is proposing the development and delivery of passenger freight services in a bid to improve connectivity in the country. Investments in suburban railways through special purpose vehicles will aid in the sustained growth of infrastructure, as well as of the building materials industry.
The focus on FAME-II is another positive takeaway, as Rs 10,000 crore was allocated to promote the use and manufacturing of electric vehicles (EV) and related infrastructure. Through this initiative, the government not only aims to encourage the use of EVs but also save 846 million tons of CO2 emissions, along with reduced dependency on oil. The plan is to achieve savings of 474 million tons of oil equivalent with this move.
Additionally, the increase in customs duties on certain items like vinyl flooring, PVC and tiles will propel the demand for made-in-India products and will benefit domestic industry and Indian brands.
Despite these measures, the Budget fails to address key expectations of the industry, such as its demand for a single-window clearance mechanism. Currently, business establishments are required to get approvals from multiple departments. This results in significant delays in the process of clearance. This is a concern amongst the companies that are interested in investing in infrastructure development through PPP. Single window clearance will reduce red-tape, which will make the sector more transparent and thereby encourage investment in the ecosystem.
Rationalisation of Goods and Services Tax (GST) was another expectation that was left unaddressed in the Budget. Building materials are currently taxed under various brackets. The industry was hopeful that the government would bring down the GST rate of a few of the essential raw materials from the current bracket of 28%, to 18%. The reduction would have helped the industry bring down the cost of the products and thereby improve consumption. Despite the government’s strong impetus on connectivity and logistics, there is still no measure in place to bring petroleum and natural gas under GST. Currently, both these products are taxed under VAT, due to which there is no uniform rate across the country. Natural gas is used in the production of tiles, and bringing it under GST will positively impact prices of tiles across India by possibly as much as 10%. Apart from the building materials perspective, implementation of GST for natural gas would also bolster the logistics sector, which is crucial for both the growth of the building materials industry and development of infrastructure of the country.
Overall, the Union Budget 2019 successfully highlights the government’s will to build a New India. Implementing the initiatives that have been proposed will strengthen the economy. The industry is hopeful that the government will address the other concerns through necessary policy interventions over the next few years.
The author is managing director of Aparna Enterprises Ltd. The views herein are personal.