India must boost private sector participation to maintain its infrastructure growth momentum, which has been largely driven by public sector investment, according to the Economic Survey 2023-24. The survey also called for improving quality of data on infrastructure development, financing, and utilisation to drive more effective policy-making and identified delays in land acquisition and obtaining land-related clearances as key challenges for the sector. “The addition to the stock of infrastructure in the last five years owed predominantly to public sector financing. Private sector participation is not forthcoming to the extent desired,” the survey said. Despite substantial investments in connectivity and energy-related infrastructure, issues such as land acquisition delays and the slow digitization of land records persist, it said. The survey also highlighted long payback periods for large projects, the absence of an independent regulator for infrastructural sectors, and problems with contractual and project structuring as major barriers to private sector participation. To address the private sector’s reluctance in mobilising large equity and debt at affordable costs for infra projects, the government brought in public-private partnership (PPP) models. “Many novel PPP financing models, like hybrid annuity model, have been introduced to mitigate this constraint. But private sector participation through these modes has so far been limited to only certain sectors like roads and water,” the survey noted. To encourage private sector investments, the survey recommended numerous initiatives at the subnational level, which includes state and local governments, to facilitate resource mobilisation for infrastructure development. “Examples include pooled financing mechanisms for municipal projects, specialised municipal intermediaries, asset recycling programs, tax increment financing and land sales and development rights among other innovative approaches,” the survey said, taking examples from across the world. For better tracking of infrastructure projects, the survey suggested consolidating data from multiple sources to provide a comprehensive inventory of projects at different levels. “The last decade witnessed earnest efforts on the part of the Government to build institutions and structures that monitor progress in infrastructure and disentangle bottlenecks. However, there is no single source that gives an inventory of infrastructure projects in the country, undertaken at different levels so as to evaluate progress sectorally and sub-sectorally vis-à-vis corresponding targets,” it said. Currently, data on infrastructure can be obtained from various databases, including the National Infrastructure Pipeline, the PPP India Portal, heads of budget accounts and reports of the respective infrastructure-focused ministries, among others. “However, when attempting to assess infrastructure spending and development across time based on the Harmonized List (HML) classifications for a macro-level overview, these databases fall short due to the lack of consistency in the frequency of data collection, lack of uniformity in the methodology followed and cross fund flows between institutions which can lead to double counting. This also makes comparing data from different sources difficult,” the survey said. It also recommended detailed sub-sector assessments of infrastructure demand and tracking utilisation of existing facilities. Another challenge faced with data on infrastructure financing is difference in reporting formats and sectoral splits followed in different sources of financing, the survey noted. It added that data on capital expenditure by urban and rural self-governments, currently maintained by the Ministry of Housing and Urban Affairs and the Ministry of Panchayati Raj, “is not available in good shape”.
