Development Watch – Week #4 July ’24
Development News
Special focus on post-election Budget of 2024
Budget to boost affordable housing, infrastructure, industries
The Union Budget 2024-25 introduces significant reforms for affordable housing, infrastructure, and urban planning. Measures include investment in industrial parks, digitization of land records, and development of transfer-oriented cities (with a population of over 30 lakh). These initiatives aim to boost economic growth and streamline real estate processes. Capital expenditure of Rs. 11.11 lakh crore, i.e., 3.4% of GDP for infrastructure will propel growth through infrastructure development and enhance connectivity across the country.
The government’s decision to support construction of 3 Crores additional homes under Pradhan Mantri Aawas Yojna (PMAY) with an allocation of Rs. 10 lakh crore towards 1 Crore homes in urban areas. The proposed development of investment-ready industrial parks in or near 100 cities, along with the sanctioning of 12 industrial parks under the National Industrial Corridor Development Programme will also boost industrial growth, create jobs and attract investments.
Budget to spur Rural demand and jobs in agriculture
Nirmala Sitharaman’s budget is focused on job creation, infrastructure, education and rural development. It is set to stimulate rural consumption. Increased allocation and fiscal consolidation boosted the Nifty FMCG index. Parle Products predicts higher spending. Consolidation has boosted the Nifty FMCG index. Dabur India and Angshu Mallick also see demand growth. Standard deductions were raised to Rs. 75,000. Grant Thornton Bharat mentioned Rs. 1.52 Lakh crore has been set aside for the agricultural sector. Consumer goods companies have been stepping up last-mile distribution, stepping up focus on low-unit packs and investing in consumer activation in rural India. There are shoots of revival in Rural India starting January-March after 5 quarters of subdued growth.
Need to ramp up Wind and Solar Energy storage
Electricity stored in batteries is a key component to fast-track India’s energy transition away from dirty fuels. The country’s lithium ion battery storage industry – which can store electricity generated by wind turbines or solar panels for when the sun isn’t shining or the wind isn’t blowing. This makes up for just 0.1% of global battery storage systems. Battery storage is growing fast, with around 1/3 of India’s total battery infrastructure coming online from 2024. India currently has around 100 MW of storage capacity from batteries, with another 3.3 GW of clean energy storage coming from hydropower. According to estimates at least 74 GW of energy storage from batteries is needed from batteries, hydropower and nuclear energy by 2032.
Solar energy exemption on capital goods
Finance Minister of India presented the budget on 23rd July. the FM also launched the PM Suryaghar Muft Bijli Yojana in the Budget. The aim is to install rooftop solar panels to enable 1 Crore households to obtain free electricity up to 300 units each month. The FM has also said that a policy to support pump storage projects will be brought to provide round the clock energy. NTPC and BHEL in JV will be setting up 800 MW super critical thermal power with higher efficiency. Solar energy and energy transition are critical in the fight against climate change. To support the energy transition, the list of exempted capital goods for use in the manufacture of solar cells and panels in the country. In the view of sufficient domestic manufacturing capacities for solar glass, glass and thinned copper interconnect, the government proposes not to extend the exemption of customs duties provided to them.
India’s future as an offshore wind powerhouse
The government has approved a Rs. 7,453 Crores ($900 million) offshore wind funding scheme, a welcome move to kickstart the industry. India has thus far lagged behind its global peers with no installed offshore wind capacity in the country, despite the international market size reaching close to 75 GW. In India, just two of the 9 coastal states – Gujarat & Tamil Nadu – have a combined offshore wind potential of 71 GW. India also aims to install more than half of this capacity (37 GW) by 2030, as part of its overall non-fossil fuel goal of 500 GW. The government’s new funding scheme helps address this early inertia by including INR 6,853 crores (US $800 million) of viability gap funding (VGF) to incentivize the development of India’s first offshore wind energy projects. Remaining amount has been allocated to ports to manage the logistical requirements of these projects. There is a strong case for India to prioritize offshore wind projects. They deliver better reliability of electricity supply, even during peak hours. This is owing to faster wind speeds and higher capacity factors, compared to other renewable energy sources, incl onshore wind.
Budget 2024 allocation for Railways
Budget 2024-25 has given a broader push towards modernized Vande Bharat trains, to ease congestion, and faster freight movement on energy, cement and port connectivity routes. Amount for Mumbai-Ahmedabad bullet train was lowered from Rs. 25,000 Crores to Rs. 21,000 Crores in the full budget. The dedicated Freight Corridor is expected to get a boost with enhanced budgetary support of Rs. 8,155 Crores, up from 3,955 Crores in the interim budget. Capital Expenditure for Rolling Stock (locomotives, wagons, and coaches of trains) is pegged at Rs. 40,314 Crores. There is a higher outgo expected for diesel and electricity as well. Total capital expenditure of the Railways has been maintained at Rs. 2.52 lakh crores for the fiscal 2024-25.
Rs. 2,357 Crore allotment for Civil Aviation Ministry
The civil aviation Ministry’s budget has been reduced to Rs. 2,357 Crores for the current fiscal with Rs. 502 crores allocated to the regional air connectivity scheme. This is down from Rs. 850 Crores in the previous year. The budget also includes funds for revival of 22 airports, 124 RCS routes, and ‘Viability Gap Funding’. for North East Connectivity. Additionally, the PLI Scheme for drones will receive a higher allocation of Rs. 57 Crores.
Focus on Urbanization, Infrastructure growth
Real estate industry leaders have praised the Union Budget for its focus on urbanization, infrastructure development and women’s empowerment. CREDAI West Bengal’s Sushil Mohta lauded the goal to increase real estate’s GDP contribution to 13% from 8% by 2025. The budget includes allocations for urban housing affordability, rental housing for industrial workers, and regulatory reforms. Initiatives such as Rs. 2.2 lakh crore allocation for urban housing affordability and Rs. 10 lakh crore investment to address housing needs for the poor and middle-class families. This includes dormitory style housing for industrial workers under the PPP mode.
Rs. 26,000 Crores boost to Road connectivity projects
As part of the Union Budget, the Finance Minister announced Rs. 26,000 Crores for the development of various road connectivity projects on Tuesday. The projects include the Patna-Purnea Expressway, the Buxar Bhagalpur highway, Bodhgaya-Rajgir-Vaishali-Darbhanga Route. There is an additional 2-lane bridge over the river Ganga in Buxar. The government aims to bid out 54 road projects worth over Rs 2.2 lakh crore and covering a length of 5200 km on build-operate-transfer (BOT) model. The Finance Minister said that new airports, medical colleges and sports infrastructure in Bihar will be constructed. An additional allocation to support capital investments will be provided.
Reforms for Shipping Industry in 2024
India’s sweeping shipping sector reforms aim to cerate jobs and remove customes duties on vessel components and warship spare parts. Supported by Ninrmala Sitharaman and Sarbananda Sonowal under Maritime India Vision 2047. This includes leasing, cruise tourism, tax exemptions, simpler foreign shipping company tax regimes, IFSCA links, and addressing low overseas cargo share through shipbuilding repairs and a presumptive taxation regime. There is also a proposal to introduce a variable capital company structure for financing leasing of aircraft and ships. This will help companies with International Financial Services Centres Authority (IFSCA)-GIFT city dispensation.
Local Feedback
LocalFeedback.org aims to track and document actionable parameters that help improve urban and rural infrastructure. The founder, Susmita, has juggled diverse roles in real estate, project budgeting, valuation and execution on construction sites. Having traveled to more than 20 countries, she has worked across 4 regions in India. Her areas of interest include sustainable buildings, electric mobility and urban development. She visited top-ranking cities on livability indices and has presented published papers at international conferences.