New Delhi: Union Finance Minister Nirmala Sitharaman Saturday announced a slew of policy measures in Union Budget 2025 to attract more private sector investments for infrastructure, but breaking from the trend in recent years, the budgeted capital expenditure (capex) for the sector saw little hike.
In what many sectoral experts called a “negative surprise”, the capex allocated for infrastructure development in the 2025-26 financial year is just marginally higher at Rs 11.2 lakh crore against Rs 11.1 lakh crore in the 2024-25.
Though compared to the 2024-25 revised estimate, when the actual capex came down to Rs 10.2 lakh crore, the capex allocated for 2025-26 is a 10 percent increase.
Gaurav Dua, senior vice-president and head, Capital Markets Strategy in Mirae Asset Sharekhan, said the focus seemed to have shifted from capex to consumption.
“The government is falling short of meeting the central government allocation of Rs 11 lakh crore in FY 2024-2025. And the allocation for next year is only Rs 11 lakh crore with reduction in allocation on defence sector. Clearly, the measures taken to boost consumption and provide relief to weaker sections of the society have left little headroom for capex allocation,” Dua said.
Private capex push
Among the several measures to “invigorate private sector investments” was a direction to each infrastructure ministry to come up with a three-year pipeline of projects to be developed in the Public Private Partnership (PPP) mode.
“States will also be encouraged to seek support from the IIPDF (India Infrastructure Project Development Fund) scheme to prepare the PPP proposals,” Sitharaman said on Saturday.
Sectoral experts said the government could further expand the PPP framework beyond highways. “The Finance Minister’s emphasis on encouraging states to leverage the IIPDF to develop PPP proposals is a refreshing move that could further expand the PPP framework beyond highways,” said Sandeep Upadhyay, Managing Director, Infrastructure at Centrum Capital.
To support states for infrastructure development, Sitharaman also proposed an outlay of Rs 1.5 lakh crore for states’ infrastructure spending through 50-year interest free loans.
Sitharaman also announced that the second Asset Monetization Plan would be launched for 2025-30 to plough back capital of Rs 10 lakh crore in new projects.
“Regulatory and fiscal measures will be fine-tuned to support the plan. For furthering PPPs and assisting the private sector in project planning, access to relevant data and maps from the PM Gati Shakti portal will be provided,” the finance minister said.
Upadhyay said the budget has reinforced the government’s commitment to accelerating infrastructure development by focusing on progressive policy measures to attract more private sector investments.
“A key highlight is the specific asset monetisation plan for 2025-30, aimed at infusing Rs 10 lakh crore into new projects. This initiative is expected to enhance much-needed equity investments, boosting overall sectoral growth,” he added.Dua said the government seemed to expect the private sector to do some of the heavy lifting with a lot of emphasis on the PPP model.
The initiatives that Sitharaman announced for different sectors of infrastructure, be it the maritime sector or regional connectivity, were all aimed at getting private capex back.
An example of this was the announcement of Rs 25,000 crore Maritime Development Fund, structured with 49 percent government support and the remainder mobilised by ports and the private sector.
Upadhyay said as a dedicated maritime economy fund, this initiative was expected to fuel shipping and shipbuilding projects under BOT (Build-Operate-Transfer) and HAM (Hybrid Annuity Model) frameworks, strengthening private sector participation.
“With these strategic interventions, Budget 2025 lays a robust foundation for long-term infrastructure growth, creating a more investment-friendly ecosystem while ensuring sustainable development across key sectors,” he added.
The urban challenge fund announced by the finance minister also mandates public-private partnerships.
Also Read: Rs 1 lakh crore Urban Challenge Fund announced to boost city growth, redevelopment & infrastructure
Lacklustre private sector participation
The government’s PPP push comes on the heels of a lacklustre private sector participation across the infrastructure sector. The Economic Survey report tabled Friday highlighted that public capital alone was not enough to meet demands.
“We need to ensure increasing private participation in infrastructure by improving their capacity to conceptualise projects and their confidence in risk and revenue-sharing mechanisms, contract management, conflict resolution and project closure,” the survey stated.
The report added the strategy to step up private participation needed coordinated action of all stakeholders – governments at different tiers, financial market players, project management experts and planners, and the private sector.
“The efforts of the Union Government would need to be supplemented with wholehearted acceptance of the need for public-private partnerships in infrastructure across the country,” the economic survey recommended.
(Edited by Tikli Basu)
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