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Will Modi's infra push revive growth? - Views on News from Equitymaster
 
 
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  • Jul 10, 2014

    Will Modi's infra push revive growth?

    Quite expectedly, this year's budget had a Modi stamp on it. This we say because of the sheer focus on infrastructure. While there was no mention of reforms and disinvestment, which also resonate to Modi's style of functioning, 100 days is a too short time frame to take decisions on such policy matters. Hence, the focal point of discussion remained infrastructure which has been in a myriad state. So, now let us take a look at some big announcements relating to infrastructure sector that were made in the budget:

    • An amount of Rs 370 bn odd was earmarked for building highways and state roads

    • Rs 140 bn was allocated for development of village roads

    • A scheme was launched for development of new airports in smaller cities

    • Rs 110 bn was allocated for development of ports

    • A series of urban development plans will be undertaken through PPP

    • Rs 65 bn was allocated for safe drinking water availability

    • Rs 10 bn will be provided for rail connectivity in the north eastern region

    • Target to build 8,500 km of national highways this financial year

    As can be seen from the above highlights, the basic focus of the budget is on bridging the connectivity gap. When we compare this with the previous year's budget the focus is quite evident. Last year's budget focused on the execution issues of infrastructure projects. For instance, it rolled out measures to increase investment in infrastructure and encouraged setting up of infrastructure debt funds. The then FM also proposed to constitute a regulatory authority to address concerns faced by the road sector.

    So, what is the difference between the previous budget and this one? And which one seems to address the woes of the infrastructure sector better?

    Well, as said previously, the earlier budget focused on ironing out execution hurdles and this one focuses on the financing issues. And in order to overcome the infrastructure mess, the need would be to fix the financing aspects first.

    Also, the previous budget had to focus on execution issues which were borne out of government's own inefficacy. Thus, all in all, we believe the current budget addresses the concerns of infrastructure more legitimately than the previous one. However, we have been used to such lip service in the past as well. Hence, the focus this time should be on execution more than ever since expectations from the Modi government are very high.

      Rahul Shah (Research Analyst), Managing Editor, Microcap Millionaires has led the team from the front in developing some of our most stringent and rewarding research processes. As per his own admission, the turning point in Rahul's life as a financial analyst came a few years back when he got introduced to the works of Warren Buffett and Charlie Munger. From Buffett, he understood the value of investing in good quality business with powerful moats and strong management teams. Charlie Munger on the other hand inspired him to be a lifelong learner and use mental models in order to arrive at the crux of matters across most disciplines. Rahul firmly believes that in order to be successful at investing, you have to do the big things right and possess a great temperament and a contrarian streak.

     

     

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