top of page
  • Writer's pictureFirst Water

Budget 2022-23: Infrastructure is the key to a strong economy

2022 has started off with quite a lot of market-moving activity with the two key ones being:

  1. What will the Fed do?

  2. Geo-political: Russia-Ukraine / China-Taiwan

While this makes for interesting short-term chatter, in the grand scheme of things, we believe that one has to have a sanguine and temperate viewpoint on the above.

Firstly, that the Fed will act with tempered measures in order to cool inflation. Interest rate movements are part and parcel of managing an economy. The biggest debtor is of course the US itself and it is unlikely to over-burden itself with excessive interest payments; and

Secondly, though the recent tensions can become more serious and have been likely triggered by the manner in which the US withdrew from Afghanistan. We are hopeful that this is just a case of political posturing and chest-thumping as rivals look to test the US’ resolve.

However, looking at the actions of today that can shape the long-term, our eyes are on tomorrows Indian Budget with the hopeful view that it will continue to foster a strong Indian economy as we ride into the Year of the Tiger.

Please find below some of our thoughts on what could be in store for Infrastructure, which really is the backbone of an economy.

As featured, in the Free Press Journal – an Indian publication.

Budget 2022-23: Infrastructure is the key to a strong economy

We believe that infrastructure will be at the centre of the Finance Minister’s agenda when she presents the Budget on Tuesday.

We expect the measures to not only focus on addressing existing bottlenecks faced within the sector but also to provide a further boost to the Public-Private Partnership model. Specifically, we expect that the Hybrid Annuity Model (HAM) used in the construction of roads and water projects etc, to be made more viable for developers and it may be extended to additional kinds of projects.

Logistical Infrastructure

Given the current environment where we are experiencing inflation sparked by rising freight costs and supply-chain inefficiencies, every move that streamlines the time to market will be welcomed. As a part of this, we expect an upgradation of port infrastructure and possibly privatisation that will help improve efficiencies. Likewise, there may be incentives for the warehousing sector that could encourage private investment. This may even cover agriculture, which is currently plagued by inefficiencies owing to the overarching dominance of the Food Corporation of India.

Railway Infrastructure

The railway infrastructure will likely see a major boost with the key themes being modernization, upgradation, and indigenisation. There is also likely to be an increased allocation towards high-speed trains, not only on the passenger side but also on the freight side, with a view to improving the competitiveness of the railways. The Finance Minister may also announce a roadmap for the rationalization of the numerous entities under the Ministry, and perhaps propose some consolidation.

Oil and Gas infrastructure

Another key area is likely to be Oil and Gas, with attention focused on reviving the Exploration and Production sector, which has been plagued by insufficient investment during the recent downcycle in the oil market. Given the soaring natural gas prices, we could see the Finance Minister fostering a more conducive environment with suitable incentives for Coalbed Methane Blocks and other coal to gas initiatives. This is extremely important, not just to reduce dependence on coal imports, but also to achieve a greener environment. Pipeline infrastructure is also likely to be a focus area, with cross-country pipelines improving India’s strategic oil security. There is likely to be a further boost to city gas distribution projects and coverage expanded. But most importantly, industry concerns around certain regulatory aspects, if addressed, could reinvigorate interest in the sector.

Water and sanitation infrastructure

This sector will likely see incremental allocations in line with the already announced intent of the Government, with the laying of pipeline infrastructure accelerating as we move closer to elections.


Telecoms is another area where a lot of uncertainty has been removed with the recent Government incentives and concessions. While there isn’t much expected for the sector incrementally, it will be interesting to see how the Government balances its cash flow estimates from the sector, which are likely to be much lower now in the wake of the package announced.

Aviation infrastructure

The Aviation sector has faced a lot of challenges due to the pandemic and it is likely that some sort of concession may be offered to players in the airport infrastructure business. However, given that the Government has very limited fiscal headroom, we can’t really expect too much. The only plausible way for the Government to do this is to open the sector to more FDI and encourage more investments.

Lastly, given the huge investments already committed by the Government to the infrastructure space and the limited number of Engineering, Procurement and Construction (EPC) players who can deliver such large projects, we need an environment that not only provides capital support to developers through models like HAM but also something which enables EPC companies to execute projects with the limited capital resources at their disposal. There is a need for innovative models that can address this if we are to come anywhere close to the stated targets. We would be keen to see if the Finance Minister has anything to offer in this regard.

64 views0 comments
bottom of page