Increased allocation to infra will benefit rural economy: ICRA

ANI | Updated: Feb 03, 2018 16:54 IST

New Delhi [India], Feb 3 (ANI): In the wake of the increased allocation to infrastructure in the Union Budget 2018-19, credit-rating body ICRA noted that this would provide a significant boost to the rural economy.

"The total capital outlay for infrastructure sector has been budgeted to increase by 20.8 percent to Rs. 5.97 lakh crore in 2018-19. Apart from the core railways, and roads, the special focus of this budget has been on rural infrastructure through development of rural roads, houses, sanitation, irrigation and water supply which will provide a significant boost to the rural economy," it said in a statement.

To meet the government's target of housing for all by 2022, the budget announced the construction of additional 51 lakh houses in rural areas. Similarly, capital outlay under PMAY (Urban) has been increased sharply which includes assistance for constructing 37 lakh homes in urban areas. The budget emphasised on the completion of on-going high priority irrigation projects and increased allocation under PMKSY-AIBP.

However, ICRA noted that the deepening of bond markets is required to support long-term infrastructure financing especially given the twin challenges faced by commercial banks - asset-liability management and increasing share of stressed assets. Relaxation of rating threshold (from AA to A), it said, is a positive, as it would encourage more participation from domestic insurance companies and pension funds in infrastructure sector.

On the roadways front, ICRA said the total budgetary allocations (including PBFF, CRF and GBS) to fund the ambitious new highway development programme (including Bharatmala) is estimated at Rs. 3,43,045 crore over FY2019-FY2022, and therefore, the allocations to road ministry was expected to increase substantially, as against the nominal 8.7 percent hike.

"Majority of the Bharatmala is expected to be undertaken through NHAI, therefore to bridge the shortfall in budgetary allocations, NHAI is expected to raise funds by monetising more assets through toll-operate-transfer and Infrastructure Investment Trust routes (by transferring mature assets to SPVs)," ICRA said.(ANI)