Prime Minister Narendra Modi’s announcement on the 73rd Independence Day on providing water connections to every household in the country at an estimated capital expenditure of over ₹3 lakh crore is expected to create huge business opportunities for corporates, said analysts.
They said the move would provide employment to millions of people and may kick-start the investment cycle.
“These are part of a ₹100-lakh crore ambitious investment plan for the next five years. Certainly, the investments in water-related projects are a step in the right direction,” said Jagannarayan Padmanabhan, director, Practice Leader, Transport Infrastructure Advisory, CRISIL.
He said all investments in water supply-related projects should be made by the government as private sector would not be keen to invest in such projects since pay-per-use model has not been established in the sector.
Vinod Karki, head, Strategy, ICICI Securities, said, “Multiplier impact of the central government’s capital outlay on aggregate demand is much higher and continues for a much longer period as compared to the revenue expenditure such as tax cuts or other income stimulus. “Also, such investment results in job creation and ancillary economic activities. So, from a quality of expenditure perspective, this is a welcome move to kick-start aggregate demand,” he said.
He said the experience of the past five years had shown that private investments had not made a comeback despite robust growth in government capex, especially on transportation infrastructure.
“The focus on capital outlay was subdued during the first half of CY19 due to the general elections which must have impacted aggregate growth, and a renewed focus on infrastructure development will go a long way towards boosting aggregate demand in the economy,” Mr. Karki said.
However, some analysts expressed the doubt on the availability of huge funds for these projects. “These are only good announcements. Unless there is financial closure of each of these projects, it is of no use. The announcements were fine in the first term [last five years] but now people would like to see action on the ground,” said independent analyst Ambareesh Baliga. “The main question is where will the government get so much money to invest. They can not get anything from the private sector which is badly battered and has no money to invest. The announcements are only intent. Now people want execution,” he added.
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