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Wednesday, February 1, 2023

Union Budget FY24 – High on promise, low on specifics

Prologue: If you find these observations completely trivial, that is precisely the idea. The budget speech and most of the promises made thereunder sound trivial, lacking specifics.

As expected, the budget speech of the finance minister, while presenting the last full budget of the union government before the next general election, sounded like an election manifesto. The finance minister counted the achievements made in the past nine years (since 2014) of her party’s government; and made many promises for the future, totally lacking on specifics.

Perhaps for the first time in the history of independent India, the finance minister used “We will” and “will be” to make all the budget proposals. The general convention has been to say “I propose to” or “is proposed”. Besides, the nomenclatures of an overwhelming number of central sector schemes now use “PM” as prefix. It is obvious that the central government is too conscious to ensure that the electorate must know that the benefit provided to them is coming from the central government.

The obsession with complex names of schemes, apparently reworked from a pre-defined acronym, also continues. As has been the practice in the past few years, many schemes have been renamed and/or clubbed to give an impression of new schemes.

The capital allocations made in the budget are mostly incongruent to the promises made, making the promise less credible. Adjusting the promises with the funds allocation, the budget is a mundane account presentation. It provides marginal relief to middle class taxpayers; proposes to plug some loopholes that are used by high networth individuals to evade taxes; continues the task of simplification of tax administration, and proposes to ease compliance for entrepreneurs.

The best part of the budget speech was the recognition of changing socio-economic paradigm in terms of adoption of technology and digitalization of routine life. The finance minister not only used technical jargon in her speech, but also made several proposals that potentially could enhance adoption of technology in the normal course of business, e.g., education, business transactions, data storage and exchange, and public services. The idea is to improve Ease of Doing Business by increasing the speed and efficiency.

Key themes

1. Inclusive Development

2. Reaching the Last Mile

3. Infrastructure and Investment

4. Unleashing the Potential

5. Green Growth

6. Youth Power

7. Financial Sector

Positive take away

Farm sector

· Proposal to build an open source digital platform for farmers to improve communication, access and support for agri based enterprise.

· Establishment of an agriculture accelerator fund to transform agriculture practices, increase productivity and profitability. Farm credit target increased to Rs20trn.

· Plan to set up massive decentralised storage capacity for marginal and small farmers.

Education & Skill development

· Plan to materially improve teachers’ training.

· National digital library for students.

· Further enhancement of 740 Tribal residential schools.

· Digitization ancient inscriptions.

· PM Skill Development 4.0 to be launched; and include coding, AI, robotics, mechatronics, IOT, 3D printing, drones, and soft skills.

Capital expenditure

· 33% increase in total capital expenditure outlay to Rs10trn.

· 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors.

Ease of doing business

· Simplification of KYC

· Expansion of Digilocker scope

· PAN to be common business identifier across agencies.

· Unified filling process. No need to submit same information to multiple agencies.

MSME support

· Provision to ensure prompt payment to MSME vendors.

Climate change

· Rs350bn outlay for energy transition.

· Green credit program to be unveiled.

Small savings

· 2yr Mahila Samman Savings Certificate bearing 7.5% p.a interest

· Senior Citizen Savings Scheme limit doubled to Rs30lacs.

· Limit of monthly income account increased to Rs9lacs for single account and Rs15lacs for joint account.

Negatives

· No improvement projected in Tax to GDP. Tax revenue to grow exactly in line with nominal GDP growth of 10.5%.

· Interest payment to rise by 14.8% to Rs10.8trn.

· No provision for disinvestment proceeds.

· Sharp cut in capital allocation for school and higher education.

· Sharp cut in allocation for MNREGA, Food subsidy and assistance.

· Negative real growth in allocation for smart city, PM Awas Yojna, national Livelihood mission, etc.

· Abysmal Rs42.4cr (-17%) allocation for capex in agriculture and farmer welfare.

· Poor 1.7% hike in revenue expenditure for agriculture and farmer welfare.

· Poor capital expenditure outlay for skill development (Rs99.2cr); Science & technology (Rs88.3 cr); forest and climate change (Rs145cr) food and PDS (Rs150.3cr).

· Doors opened for opaque off shore derivative instruments (P Notes) through IFSC (GIFT city).

· Discouraging foreign travel and investments through higher TCS (20%)

Key direct tax proposals

Corporate Tax

· Increase in limit for presumptive tax – MSME from Rs2cr to Rs3cr; Professionals from Rs50lacs to Rs75 lacs.

· Payment to MSME to be allowed as expense on actual payment basis, subject to the time limits under section 15 of MSMED Act.

· New cooperative that commence manufacturing activity before 31 March 2024 may avail lower tax rate of 15% as available to new manufacturing companies.

· Now the new start up units established before 31 March 2024 could avail tax benefits.

· Cost of all self-developed/earned intangible assets to be treated as NIL for capital gains purposes.

Personal taxation

· New tax regime introduced in FY21 to be the default tax regime for all individual assesses.

· Deduction u/s 54 and 54F in respect of capital invested in a residential house to be capped at Rs10cr.

· If the aggregate premium on insurance policies issued on one life exceeds Rs5lac in any previous year during the term of the policy, the proceeds from such policies would be taxable as other income. Deduction will allowed for premium paid, if such deduction has not been claimed earlier. This does not apply to ULIP, Keyman insurance and proceeds received post death of the insured.

· All income from online gaming to be subject to TDS.

· Conversion of physical gold into electronic gold receipts not be treated as transfer for capital gain purposes.

· Income tax slabs under new personal income tax scheme reduced to five from seven earlier.

· Minimum exemption limit increased to rs3 lacs from rs2.5lacs earlier.

· Standard deduction to be available under new tax scheme also.

· Effective maximum marginal tax rate reduced from 42.74% to 39% by capping all surcharges at 25%.

· Limit for exemption in respect of leave encashment increased from rs3lacs to rs25lacs.

· Income from investment in Market Linked Debentures to be taxed as Short Term Capital Gain on debt securities.

· Overseas tour package and remittance under LRS (for purposes other than education) in excess of Rs7lacs to attract 20% Tax Collection at Source.

· The debt repayment component of distribution made by REIT and InVIT to its unit holders to be fully taxable in the hands of unit holders as income.

Some key budget statistics

Fiscal Trends

Trends in government expenditure

An investor’s prelude to the union Budget FY24

An informal survey of about 40 market participants, conducted in the past 4 days, indicates that unlike the previous budgets presented by the finance minister Ms. Nirmala Sitharaman, the market’s expectations from the budget to be presented today might be negligible.

In fact, most participants appear to be praying that the finance minister shall skip the investment and capital markets from her budget provisions altogether. No change in capital gains taxation is all they would wish for.

One veteran portfolio manager summarized the broader market sentiment in one simple sentence - “The boat is in rough waters. All that I could wish for is that FM does not rock it at this time.”

I would read the budget presented by the finance minister later today and assimilate the market’s reaction to it, keeping this in mind.

How to read the budget?

The budget should be read and analysed by investors, as they would read and analyse the annual report of a company they are invested in.

If we consider India as a company - annual budget would be the annual account for the current year and forecast for the next year; and budget presentation in the Parliament and subsequent press conference would be the conference call with various stakeholders.

An investor who wants to invest in this company would want to objectively analyze:

(i) The past performance of the company in terms of growth;

(ii) The credibility of the management in terms of professionalism, integrity, execution and delivery on promises;

(iii) The future prospects in terms of growth, competitiveness, financial stability, cost of capital, price stability, etc.; and

(iv) The relative positioning in terms of expected returns, access to markets, regulatory flexibility, costs (taxation etc.).

Past performance

The Indian economy has faced a variety of internal and external challenges in the past 6-7 years that have hindered acceleration of economic growth, despite a number of positive policy stimulants. Demonetization, Covid-19 pandemic and Russia-Ukraine War could be listed as the three major events that contributed to the slowdown in momentum of growth. High inflation due to broken supply chains and the consequent monetary policy tightening were notable collaterals that impacted the growth materially.

Implementation of Bankruptcy Code and RERA, nationwide roll-out of GST, widespread adoption of digital payments, schemes to encourage domestic manufacturing (production Linked Incentive or PLI) with the objective of import substitution and/or export promotion, some major infrastructure development initiatives like National Logistic Policy, multiple greenfield expressways, etc.; initiatives to improve carbon footprint, especially through clean fuel etc. are few of the growth accelerators that have not yielded the desired results as yet due to the growth blocking events.

It is expected that in the next two years the strong headwinds created by these challenges might subside and we may see growth momentum accelerating. In the next 23 months (end of 2024) we may witness delivery of many healthy projects that shall further accelerate the economic growth and development process of India. These projects include the much awaited dedicated Freight Corridors, Mumbai Trans Harbor Link, Delhi-Mumbai Expressway, Ganga Expressway, Navi Mumbai and NOIDA international airports, Mumbai metro etc. Completion and operationalization of these key infrastructure projects shall also catalyze significant follow up industrial and real estate capex in the private sector; while creating scope for another round of large infrastructure building capex in the public/private/joint sector.

The past performance in terms of economic growth has not been remarkable. However, there is a case to not let the past performance overwhelm the sentiment and expectations for the mid-term (next 5-6yrs).

The latest Economic Survey claims that the economy has fully recovered from the impact of the pandemic and war and is poised to grow at an accelerated speed.

Governance capability

The governance quality and execution track record of the incumbent government has not been unblemished in the past few years. There have been instances of superior execution, as in case of vaccination, food security and bio fuel etc., expressway construction; whereas in many other cases execution has lagged – specially in case of disinvestment, GST reforms, education policy, direct tax code, judicial reforms etc.

Future prospect

In FY23, the Indian economy is expected to grow by 7%, primarily driven by private consumption and public capex. With inflation showing definite signs of easing and settling within the RBI’s tolerance range (4-6%), monetary conditions may ease in FY24. The bank and corporate balance sheets have been materially repaired and financial conditions are now stable. Both the consumer and business confidence are improving. With buoyancy in tax collection sustaining and Covid-19 stimulus unwinding, the fiscal conditions may improve, further enhancing the scope for public investments in capacity building.

The changes in the global order that are leading the shift in global supply chains, could also favor the economies like India that have a robust political system, stable financial system and supportive economic infrastructure in place.

Two things that may keep the growth acceleration under check are (a) global economic slowdown impacting the export demand and keeping the current account under pressure; and (b) the cost of funds (interest rates) staying at elevated levels.

The latest economic survey forecasts the real economy to grow at a pace of 6.5% (nominal growth of 11%) in FY24.

Relative positioning

The relative positioning of India in terms of economic growth potential appears very strong at this point in time. However, insofar as the financial markets are concerned, the conditions are not so favourable. The relative valuations are expensive and global investor positioning still overweight as compared to peers like China. We may therefore continue to see selling pressure from global investors for some more time. Nonetheless, for domestic investors the risk reward appears marginally positive in equities and very good in bonds.

Key themes

1. Inflation and rates peaking, liquidity improving

2. Fiscal conditions improving

3. Capex story slowly materializing

4. Current account under stress, but external balance comfortable

5. Financial condition stable

Tuesday, January 31, 2023

Budget 2023: No negative would be the best positive

The union budget presented on 1^st February 2022 was widely hailed as growth supportive. Almost all experts and commentators opined that ~14.5% in budget capex would catalyze a new wave of infrastructure and industrial development and growth in the country. The finance minister highlighted the following four pillars of growth as the basis of her budget proposals.

1. Accelerated development of world class infrastructure (PM Gati Shakti)

2. Using digital capabilities for delivering inclusive development

3. Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action

4. Crowding in private investment through enabling policy environment

Most strategists projected high growth for the infrastructure and capital goods sectors in the wake of great emphasis placed on capex by the finance minister.

However, collective wisdom of the markets did not concur with the enthusiasm of the finance minister and a majority of experts, as the funds allocations in the budget did not match the promise. The benchmark Nifty50 corrected over 5% in the five weeks following the presentation of the budget.

After one year, on the eve of another budget, the benchmark Nifty is almost the same level as it was a year ago. The promise of high growth made in the budget has been belied. Industrial growth (especially manufacturing growth) has collapsed in FY23. The latest NSO estimates peg FY23e industrial growth at 4.1% and manufacturing growth at a dismal 1.6%. Construction sector has also witnessed deceleration. Investment (Gross fixed capital formation) growth has declined to 11.5%.

In recent months some signs have emerged that indicate that the much awaited capex cycle might be just beginning to materialize and we might see some tangible outcome in the next couple of years. The budget for FY24 is therefore important in the sense that nothing is proposed in the budget which negatively impacts the nascent capex recovery in the private sector (also see Time for delivery is nearing). However, given the fiscal, economic and political constraints I shall not be expecting any material positives from the budget.

Some key highlights of the market performance since 2022 budget presentations are as follows:

· Benchmark Nifty (1%) is almost unchanged since the last budget.

· Small cap (-17%) have underperformed majorly. Midcap )-0.5%) have been almost unchanged since the last budget.

· PSU Bank (~28%), FMCG (~21%), Metals (~16%) and Auto (~11%) have been the top outperforming sectors.

· Media (-17%), Realty (-16%), IT Services (-14%) and Energy (-7%) have been the top underperforming sectors.

· Infra (-1%) and Services (-3%) did not do much in the past one year.

Friday, January 27, 2023

Brokerages preview of Budget 2023

Stabilization is the key (Yes Bank)

This Budget would have the daunting task of progressing towards consolidation after the covid related fiscal push. On the other hand, an eye needs to be kept on the economic growth in an atmosphere of slowing global growth and tightening domestic financial conditions. On a strategic level, the broad reforms process should continue with outlays earmarked for rural development, boosting manufacturing, employment generation, and capacity building through infrastructure. Despite this being the last Budget before general elections, we do not anticipate much in terms of tax dole outs for the masses.

For FY24E we anticipate the Budget deficit to increase to INR 17.8 tn, GFD/GDP to print at 5.9% (after attaining the 6.4% target for FY23BE). Net and gross borrowings are likely to increase in FY24E to INR 11.7 tn and 15.4 tn respectively. Despite RBI pausing after another 25bps hike in February 2023, we see a scope for yields to rise in H1FY24 towards 7.60-7.75% as centre targets to front-load borrowings in H1.

The fiscal balancing act (Emkay Equity Research)

The upcoming Union Budget will require policymakers to ensure the fiscal impulse is maximized to improve potential growth, while signaling adherence to medium-term fiscal sustainability. This will require continued financial sector reforms, better resource allocation, and funding by aggressive asset sales via functional infrastructure monetization, disinvestment, and strategic sales, among others.

We project FY24E GFD/GDP at 5.8% after 6.4% in FY23E, implying net and gross borrowing at whopping Rs12trn and Rs15.1trn, respectively, adjusted for Covid-GST comp. loans. The scope for a blatant populist budget looks bleak amid moderating tax revenue, high committed revex, and market loans.

On the revenue side, lower tax buoyancy could be partly countered by higher RBI dividend and still healthy assumption of divestment proceeds. We watch for possible changes to capital gains tax structure and new personal tax regime, extension of concessional 15% tax rate for new manufacturing units, and higher import tariffs on PLI-related products.

Expenditure focus is likely to be on rural, welfare, infrastructure, PLIs, and energy transition. Capex spend will remain significantly higher than pre-pandemic (2.9% of GDP), especially amid larger fiscal multiplier on employment and growth and still-lacking private capex.

Steady as she goes (Axis Capital)

FY24 budget on 1 February 2023 is likely to be a mundane reading showing good fiscal progress in FY23 (6.1% of GDP fiscal deficit vs. 6.4% budget) and plans to further lower the deficit in FY24 (5.7% of GDP) by rationalizing subsidies. The central government is likely to conserve resources, targeting low double-digit growth in allocation to capex, rural development, social services so that outcomes don’t suffer due to cost inflation.

Central government’s fiscal deficit is likely to fall further to 5.7% and will be on track to achieve 4.5% of GDP by FY26. The 0.4% of GDP fiscal consolidation is supported by INR 1.5 trillion drop in food and fertilizer subsidies due to merging of food subsidy under PMGKAY with NFSA and correction in global fertilizer prices. This outcome along with modest tax buoyancy (12% YoY growth) should give the government space to target low double digit spending growth in rural development and capex.

Key expectations in the budget

· Tinkering with personal income tax slab to provide relief on real disposable income.

· Expand scope of Production Linked Incentive (PLI) schemes and green hydrogen.

· Bump-up allocation for rural development and social welfare to ensure outcomes don’t suffer due to cost inflation.

· Target double digit capex with increase in capital allocation to new DFI and special long-term loan to states for capex.

· Increase scope of asset monetization pipeline.

Capex focus to stay but rural thrust also likely (Nirmal Bang Institutional Equities)

· We expect fiscal consolidation to be gradual and are building in a fiscal deficit of 6.2% of GDP in FY24 vs. 6.4% of GDP in FY23.

· While we do not entirely rule out the government factoring in a slightly lower fiscal deficit of 5.9-6% of GDP for FY24, we believe that under-estimation of revenue expenditure or aggressive revenue estimates may not be palatable for markets.

· However, we also note that in recent years, the government has erred on the side of caution with its revenue estimates. We are factoring in tax revenue growth of 11.5% for FY24, just a tad higher than our nominal GDP growth of 10.5%.

· We expect the focus on government capex to stay and factor in 15% growth in FY24. We believe that Railways and Roads will be the largest beneficiaries of incremental government capex.

· Overall, we factor in revenue expenditure growth of ~7.5% in FY24 over the revised estimates for FY23. Ahead of Lok Sabha elections in CY24 and given the recent rural distress, we expect higher allocation to rural schemes with focus on rural infrastructure development. This will partially offset lower fertiliser subsidies and some moderation in food subsidies.

· We expect higher payouts under various government schemes to ease the burden of inflation for the ‘Bottom of the Pyramid’ strata. This may include higher payouts under the PM Kisan Yojana announced in the budget or during the course of FY24.

· We expect the budget to remain focused on improving India’s competitiveness as a manufacturing hub and reducing logistics costs. Incentives for industry are likely to be oriented towards encouraging investments in clean and green technologies.

· We are penciling in net borrowing of ~Rs12.1tn and gross borrowing of Rs16.5tn in FY24, which along with the inflation focus of RBI will keep bond yields range-bound at ~7.3% in the near term.

Trade-off between capex and consolidation (BoB Caps)

The government has reiterated its commitment to India’s fiscal glide path which targets a 4.5% fiscal deficit by FY26. We thus expect a lower figure in the FY24 budget estimate (BE) vs. the 6.4% deficit in FY23BE. Additionally, for India to become a US$ 5tn+ economy from the current ~US$ 3tn, continued momentum in the investment cycle is vital. Therefore, we believe the capex support seen in the past two budgets will continue. The FY23BE of Rs 7.5tn capex is likely to be met and should see a bump up of 10-15% to Rs 8.5tn-9tn in FY24BE, with outlays in the usual sectors of roads, highways, defence and railways. We believe the production-linked incentive (PLI) scheme could be extended to newer sectors, while affordable housing would also stay in focus.

· Fiscal normalisation post Covid expected to remain a core theme of the FY24 budget; fiscal glide path likely to be maintained.

· Budget could stay geared towards improving living standards of the poor while continuing to build necessary infrastructure.

· In line with past trends, we do not expect the budget to spark a significant move in the stock market.

A tightrope walk between fiscal and elections (Philips capital)

FY24 Union Budget is likely to be a tightrope walk, considering its fiscal guidance, and the 2024 union elections. We estimate fiscal deficit for FY24 at 5.8-6.0% and FY23 at 6.2%. Muted nominal GDP growth (due to global slowdown and low deflator) will constrain tax revenue and government spending, compared to the strong pace in the last couple of years. Thus, the government’s innovation will be tested – to deliver an effective budget, encompassing capex, rural, social, policy incentives, subsidies, and tax/growth buoyancy. In case the government adopts an easy approach to the fiscal path, across-the-board expansion can be expected and delivered.

In the upcoming budget, we anticipate continued focus on PLI incentives (for new sectors), Atmanirbhar Bharat (to enhance manufacturing, exports, while managing imports), sustainability (supply/demand push towards renewable energy and alternative technologies), and infrastructure expansion (defence, railways, ports, logistics, and roads). The government wants to encourage the adoption of the new income-tax regime, thus incentivization is likely. Fiscal support to rural India will continue (adjusting for food and fertiliser subsidy); we will be watching for any meaningful stimulus (low probability considering fiscal constraints).

Fiscal deficit for FY22 should be lower than budgeted at 6.2% vs. 6.4% BE, helped by higher nominal GDP growth, tax buoyancy, and expenditure management; non-tax revenue will fall short due to low RBI dividend and disinvestment. Higher food/fertiliser/petroleum subsidy will result in revenue expenditure surpassing BE. Capex targets will be largely met. For FY23, we expect muted revenue expenditure (4-5%) growth, and decent capex growth at 7-8%. Lower-than-FY23 subsidies will generate scope for other rural and social expenditure. Our tax growth estimate is muted (5-6%) due to high base and low inflation and growth momentum. We are not very upbeat on non-tax revenue either. FY24 fiscal deficit at 5.8% offers limited scope of spending enhancement, while 6% fiscal deficit can aid expansion, catering to varied sections in an election year.

Wednesday, January 25, 2023

Letter to the finance minister

Honb’le Minister,

In the Dvapara Yuga, an epic war was fought between the forces of righteousness (Pandava) and unscrupulousness (Kaurava) , popularly known as the War of Mahabharata. In the 18 days long war, many important battles were fought. In one such battle on the 13^th day of the war, brave Pandav Prince Abhimanyu, son of Arjuna, was killed by the top Kaurav generals.

Jayadratha, the king of Sindhu State, and son-in-law of Kaurav king Dthrutrashtra, played the most critical role in this battle. Jayadratha had a boon from Lord Shiva that for one day in a great war he will be able to check the advance of the entire opponent army, except Arjuna. In this particular battle in Mahabharata war, he used that boon to stop the entire Pandava army from helping Abhimanyu, who was ambushed by senior Kaurava generals and killed. Arjuna was tactfully distracted from the main battlefield. The next day, Arjuna avenged the death of his son, by beheading Jayadratha.

The point in narrating this story is that 1^st February is the day that belongs to you. Like Jayadratha you have a boon that on that day you could choose to help Indian people, ignore them or aggravate their miseries. You also have the power to choose who you want to help, ignore or inflict pain upon. Even though, GST and latest finance commission recommendations have diminished your powers that could be exercised on 1^st February (Budget Day); nonetheless you still have significant powers to make provisions and fund programs that could materially impact the life of marginal people. It is therefore up to you, whether you choose to be driven by short term political considerations and be afraid of the market reactions; or choose to strengthen the core of India's socio-economy structure by incentivizing savers, small entrepreneurs, exporters, and the people engaged in the farm sector.

It may be pertinent to note that this would be your last full budget before the next general election. You may choose to avail this opportunity to make it as memorable as 1991 Manmohan Singh’s revolutionary budget; 1996 P Chidambaram’s dream budget; or waste it for some short term considerations.

In particular, I would suggest the following measures be taken in the budget:

(1) Interest income of upto Rs. One lac, from small savings, bank deposits and corporate deposits etc. for individual depositors be fully exempted from tax.

(2) Maximum marginal rate of taxation for the salaried taxpayers with no ESOP, Housing and Transport benefits, be fixed at 25% with section 80 exemptions or 20% without exemptions.

(3) A comprehensive review of farm subsidies and taxation of farm income may be done. The new regime may include provisions like — The farmers may be assured a minimum level of household income equivalent to minimum industrial wages in the respective states for two adults per farmer household. Farmer households holding less than one hectare of land may be assured minimum remuneration for one adult per household. Agriculture income in excess of Rs10lakh per annum per household may be taxed at the rate of 20% for farmers availing subsidized inputs like seeds, fertilizer, power and water etc. One food processing mill per village set up in cooperative mode may be given 100% capital subsidy and GST subvention for 5yrs.

(4) Export basket of India should be widened. Significant incentives may be introduced to encourage export of goods and services that are yet not exported or exported in very small measures. Also, incentives may be provided for incremental export to the geographies that account for less than 1% of India’s total export.

(5) Large corporations may be incentivized to invest in and/or collaborate with their MSME vendors. Full capital gain exemption after 5years on the equity invested in their vendors; 150% deduction on the amount spent on training and technology transfer to vendors; ownership of IPR developed together to MSME; common environmental, civic and other regulatory clearances for the ancillary units set up in close vicinity; etc.

Needless to say, these are just a few indicative suggestions. There is so much more that could be done to accelerate the growth of the Indian economy and make it much more inclusive and sustainable.

Yours truly.

Tuesday, January 24, 2023

Time for delivery is nearing

Motherhood is inarguably one of the most impactful events in this universe. It is a miracle that sometimes even defies the laws of nature. It is a beautiful and strong emotion having power to transform societies and cultures.

However, the physical process of motherhood is usually not the same for all women. For some it is a smooth transition from conception to delivery. For some it is a troublesome period of pregnancy followed by a normal healthy delivery. These women could suffer morning sickness, high blood pressure, anemia, swelling in feet and face, elevated blood sugar level, etc. Though these conditions normalize post-delivery and usually have no impact on the child’s health. Few women need to use medical intervention to get impregnated. There are some cases where a woman would get impregnated, but is unable to retain the fetus and suffers miscarriage. There are also some cases where the pregnancy is smooth but the delivery is troublesome.

Very similar has been the case with different global economies in the past few decades. For some economies the growth and development has been rather smooth in the post WWII era. These economies, now mostly developed, have conceived various projects of great economic importance and delivered them smoothly as planned; whereas many other economies have faced a variety of problems.

In the post-independence era, pregnancy has mostly been a difficult period for the Indian economy. Most projects face delays, cost overruns, legal challenges, ecological challenges, corruption charges, resistance from opposition parties, in many cases resistance from civil society. Nevertheless, the delivery is smooth and children are mostly healthy.

In the past two decades, for example, we have seen strong challenges to implementation of VAT, GST, FDI in retail, civil nuclear deal, Aadhar, Tehri Dam, Sardar Sarovar Dam, and numerous such other key projects of significant socio-economic importance. But eventually, these projects have been executed and are contributing immensely to the overall

As per a recent report of the Ministry of Statistics and Programme Implementation, out of 1438 significant infrastructure projects (costing Rs150cr or more) 343 (24%) are facing cost overrun to the tune of more than Rs 4.5 Trillion, and 835 (58%) are facing delays. 130 projects are reported to be facing delays beyond 60months, while 411 projects are delayed between 25-60 months. (see here)

Some proposals like Land Laws, Farm reform legislations etc. had to be aborted; while some projects that could prove to be detrimental to the ecology have progressed, but such instances are few and not beyond correction.

The good news however is that in the next 23 months (end of 2024) we may witness delivery of many healthy projects that shall further accelerate the economic growth and development process of India. These projects include much awaited dedicated Freight Corridors, Mumbai Trans Harbour Link, Delhi-Mumbai Expressway, Ganga Expressway, Navi Mumbai and NOIDA international airports, Mumbai metro etc.,

These projects when delivered for commercial use shall add significant impetus to the logistic efficiencies. The turnaround time at major ports like Mundra and JNPT shall reduce meaningfully. The congestion at major airports of Delhi and Mumbai shall also ease materially. The connectivity of major export hubs like NOIDA, Moradabad, Kanpur etc. will improve materially. Industrialization of states like UP, Uttarakhand, Bihar, Rajasthan etc. will accelerate; and commercial farming will also get impetus. Services like hospitality, trade and finance would also gain as the flow of international tourists and business travelers increases manifold.

Dedicated freight corridors in particular will immensely improve the turnaround time of railway cargo, while vacating massive capacity for improvement of passenger transport on the legacy lines. The frequent coal shortages at thermal power plants could become a thing past, improving power supply conditions materially.

Completion and operationalization of many key infrastructure projects in the next 24 months shall also catalyze significant follow up industrial and real estate capex in the private sector; while creating scope for another round of large infrastructure building capex in the public/private/joint sector.

It is pertinent to note that the period of FY04 to FY10 witnessed an average 6.8% of GDP spent on public sector capex. This number has plunged to 5.8% of GDP in the past 10 financial years (FY13 to FY22).