Budget 2018-19: A Trail-blazer for Road, Rail & Rural Infrastructure

Compiled by Jeet Singh

Budget 2018

The finance minister in his Budget 2018-19 announcements has played a balancing act between pressing political priorities and achieving the GDP growth and job generation targets. Terming infrastructure as the economy's growth driver, he allocated a whopping amount of Rs. 5.97 lakh crore) for infra spending (a Rs 1 lakh crore increase sanctioned in the previous budget) and stressed on the need for investments to the tune of Rs. 50 lakh crore in infrastructure. The record-breaking infra budget will be for building roads, airports, ports, railways and inland waterways to provide quality transport and freight services across the country.

In its entirety, the Budget invented twin broad contours: boosting the rural economy in order to push industrial demand and spurring investment in manufacturing as well as job generation by offering import duty protection in labor-intensive sectors, which in turn will boost rural incomes and domestic industry with a modicum of fiscal relaxation.

Roads & Highways

Budget 2018

The FM stated that the government is confident of building more than 9,000 km of highways by the end of this fiscal. For the next fiscal, the ambitious Bharatmala Pariyojna is going to be a milestone project for providing seamless connectivity to interior and backward areas and to remote borders of the country by developing about 35,000 km in Phase-I at an estimated cost of about Rs 5.35 lakh crore. The budget for highways has been increased by about Rs. 7,000 crore.

In totality, Rs. 71,000 crore budgetary allocations have been made for the transport sector. The provision is for development of national highways, expressways, 6-laning of crowded stretches of Golden Quadrilateral, and 2-laning of highways under National Highways Development Project, special program.

Road connectivity in Naxalite affected areas, Vijaywada-Ranchi Road, and providing last mile connectivity to tribal areas and Left Wing Extremism infected regions in Madhaya Pradesh, Chhattisgarh, Jharkhand and Rajasthan is a top priority of the government.

Focusing on border connectivity, the FM reiterated that the Rohtang tunnel has been completed to provide all-weather connectivity to Ladakh. Contract for construction of the Zozila Pass tunnel is progressing well, and proposed the construction of a tunnel under Sela Pass in Arunachal Pradesh.

Railways & High-Speed Trains

Budget 2018

The Budget unveiled plans to spend Rs 1.48 lakh crore (the highest ever for Indian Railways), for strengthening the network, capacity expansion, tackling congestion and wear-and-tear of track and rolling stock. Plans include modern train with cutting-edge amenities and features to be commissioned during 2018-19, redevelopment of 600 major stations, escalators on stations with a footfall of over 25,000, and CCTVs at all stations and trains to enhance passenger security. Doubling of 18,000 km and work on 5,000 km of third and fourth lines to convert them into broad gauge and transform almost the entire network into broad gauge has been envisaged. Around 12,000 wagons, 5,160 coaches and 700 locomotives are being procured in the year 2018-19.

Over 3,600 km of tracks have been targeted for the current fiscal, with a provision for about Rs 17,000 crore for new projects. Around 4,267 unmanned level crossings will be removed in the broad-gauge network. Out of the total targeted capital expenditure, Rs 73,000 crore will be spent on safety measures, and increasing use of technology like Fog Safe and Train Protection and Warning Systems.

Metro Rail & Rapid Transport

Metro projects across the country got Rs. 14,314.60 crore in the Budget 2018-19. The amount comprises of equity investment of Rs 2,341 crore, subordinate debt amounting to Rs 1,550 crore, and a pass-through assistance of Rs 10,373 crore.

Commuters travelling on Mumbai's over-crowded suburban rail system will get relief following the announcement of 90 km of double-line tracks at a cost of ~ Rs.11,000 crore. An additional 150 km of suburban rail network is being planned at a cost of ~Rs.40,000 crore, including elevated corridors in some sections. The Mumbai Metro Rail Corporation Ltd has started work on the Rs.23,136-crore, 33.5 km-long Colaba–Bandra-SEEPZ line. The standard gauge metro line will connect the Cuffe Parade business district in the city's extreme south to SEEPZ in the north-central with 26 underground and one at-grade station. In Bengaluru, a suburban rail and metro network of approximately 160 km is being planned at an estimated cost of Rs.17,000 crore.

Giving a major boost to the Regional Rapid Transit System (RRTS) corridors connecting Delhi with NCR towns, the Centre has allocated Rs 659 crore for Phase I of the project – a massive hike for the National Capital Region Transport Corporation (NCRTC), which is implementing the high-speed regional rail system. The first phase of RRTS consists of three prioritized corridors — Delhi-Ghaziabad-Meerut (92.6 km); Delhi-Gurugram–Rewari-Alwar (180 km); and Delhi-Sonipat-Panipat (111 km). The Delhi–Ghaziabad–Meerut corridor will be the first one to be executed for which pre-construction work has already been initiated. This high-speed rail will cover the distance between Meerut and New Delhi in less than 60 minutes.

The Delhi Metro Rail Corporation (DMRC) has received Rs 50 crore for its expansion in NCR. The grant is meant for two corridors: Noida Sector 32 to Electronic City and Dilshad Garden to New Bus Terminal in Ghaziabad. With Phase III of Delhi Metro nearing completion and Phase IV to be approved by the Delhi government and the Centre, the quantum of funds to be disbursed to DMRC from the consolidated fund will depend on the Phase IV project approval. The sanctioned cost for Phase III is Rs. 44816.91 crore, including all taxes as well as extension to Haryana and Uttar Pradesh.

Relief to Realtors

The FM has proposed tax relief for buyers and sellers by allowing property to be valued at up to 5% below circle rates for calculation of stamp duty and capital gains tax. Circle rates, also known as ready reckoner or guideline value, have been revised upwards by most local governments over the last 15 years. Circle rates were introduced to prevent tax evasion by declaring a lower sale price of the property on paper. Stamp duty is collected either on the sale proceeds or the circle rate value, whichever is higher. But now that real estate prices are sliding in many cities such as Delhi-NCR, Bhopal, Kolkata, Lucknow and Jaipur, circle rates are higher than the prevailing market property prices. So, a person may sell immovable property lower than the circle rate, but the registrar office still charges stamp duty at the circle rate.

Once the sale is completed, the income tax department deems the difference in the circle rate and sales value as unaccounted money, and taxes both the buyer and the seller. To minimize hardships in genuine transactions, FM proposed that no adjustment shall be made when the circle rate value does not exceed 5% of the consideration. Developers, however, say this is not enough and that stamp duty should be levied on real transaction value and not on the circle rate value. According to Ramesh Nair, CEO and Country Head, JLL India, the proposal would reduce difficulties for sellers. With this, the government has recognized that there could be price variations within a zone or locality that has the same circle rate.


The FM has launched ‘revitalization of infrastructure and systems in education' (RISE) scheme with a targeted spend of Rs 1 lakh crore till 2022. New schools of planning and architecture, 18 more IITs and NITs were announced. In addition, strategic funding to higher educational institutions has been hiked by Rs 100 crore. The Higher Education Funding Agency gets Rs 2,750 crore more, which will open up business avenues for property developers.

Aviation Sector

Budget 2018
India, the world's fastest growing aviation market, is expected to have a billion (100 crore) air travelers per annum in the next 15 to 20 years. The FM said that air travel would continue to grow with the affordable regional connectivity scheme (RCS) that will see people wearing "hawai chappals in hawai jahaaz".

As per the Budget announcement, airport capacity will be expanded by five times. Aviation minister Jayant Sinha said that air traffic in India (domestic and international combined) is expected to touch 100 crore over the next 15 to 20 years, up from an expected 20 crore in the fiscal 2017-18. The new projects will cost ~Rs 4 lakh crore. The viable airports will be run by private players and the unviable ones by the Airports Authority of India (AAI).

The push comes at a time when lack of airport infra in major cities has rung alarm bells. Amitabh Khosla, Head, International Air Transport Association (IATA) India, commented, "IATA anticipates that India will become the third largest aviation market by 2024. To make this a reality, airport capacity in India needs to be augmented and expanded quickly. The government plans to increase the number of airports by at least five times the present number of 124, to enable the country to handle the influx of over one billion travelers annually. Accordingly, an allocation of ₹60 crore to kick-start the initiative seems in order. Besides, the UDAN Scheme will be connecting 64 unconnected airports across India."

Rural Infra

The FM has proposed a 20% hike for the Atal Mission for Urban Rejuvenation and Transformation (AMRUT) schemes in 2018-19. The focus of the government will be on providing maximum livelihood opportunities in rural areas by spending more on livelihood, agriculture and allied activities and building rural infrastructure. In 2018-19, ministries will spend Rs 14.34 lakh crore, including extra budgetary and non-budgetary resources of Rs 11.98 lakh crore. These investments — ranging from constructing school buildings, rural roads, net connectivity and water supply systems, to giving free power connections to poor households — will create employment of 321 crore person-days, 3.17 lakh km of rural roads, 51 lakh new rural houses, 1.88 crore toilets and provide 1.75 crore new household electric connections.

The FM allocated Rs. 2,600 crore under the Prime Minister Krishi Sinchai Yojna – Har Khet me Pani – across 96 districts of the country where less than 30% of land holdings get assured irrigation facilities currently. For carrying forward the work started two years ago, the FM allocated Rs. 1200 crore for extending and strengthening irrigation facilities and proper management of ground water in rural areas.

Urban infra & Smart City

The government has proposed over 50% increase in allocation for smart cities from Rs 4,000 crore in 2017-2018 to Rs 6,169 crore for 2018-2019. To date, 99 smart cities have been selected with an outlay of Rs 2.04 lakh crore. About Rs 2,350 crore worth of projects have already been completed, and ~Rs 20,850 crore worth of smart city projects are under construction.

While experts welcome the move to increase budget allocation, they also point out that cities are not spending the amount allocated to them. A healthy situation may emerge when there are more projects executed on ground and cities actually fall short of the amount allocated to them. The schemes are aimed at bringing transformative change in urban areas by providing water connection to all households in 500 cities and towns, implementing projects like smart command and control centres, smart roads, solar rooftops, intelligent transport systems and smart parks, etc.

Skill Development

Another salutary aspect is the government's resolute commitment for promoting training and skill development. Measures taken will help in augmenting the level of skills among the youth, especially those belonging to the weaker sections of society.

Defense Production

The Defense budget has been hiked by 7.81% to Rs 2,95,511crore amid expectations of a higher allocation due to heightened tensions with both Pakistan and China. The government will bring out an industry-friendly defence production policy. The FM said that two defense industrial production corridors will be set up to promote domestic arms production by public and private sectors as well as MSMEs.

Reacting to the move, Defense Minister Nirmala Sitharaman said that the move will pave the way for the first defense production corridor to come up in Tamil Nadu, linking small and medium units running from Chennai, Mysore, Coimbatore, Salem and Tiruchirappali right up to Bengaluru.

Concluding remarks

This Budget has taken long-term measures for sectors like health, education, housing, rural economy and infrastructure. Consumer spending is expected to go up, and the overall business sentiment is positive. Imposition of long-term capital gains is expected to have a negative impact on the stock market in the short term. Interest rates will go down in the coming years and spur more investment in businesses and increase consumer spending, which in turn will have a multiplier impact boosting GDP growth and job generation.

A cause for concern is the fiscal deficit at 3.5% of GDP for FY2017-18 as against the target of 3.2%, and next year's goal of 3.3% rather than the 3% targeted previously. A higher fiscal deficit would make foreign and institutional investors wary of investing in Indian companies. For India's success story to gain more prominence, it is important that fiscal deficit targets are strictly adhered to. The impact a higher deficit has on a nation's credit rating is already well documented and needs no reiteration, not to mention its negative impact on inflation.

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