As per government estimates for FY2025,
India鈥檚 growth will plummet to 6.4 per cent from
8.2 per cent recorded in FY2024. Industrial growth is
expected to dip to 6.2 per cent as against
9.5 per cent and even the service sector is likely to
dip to 7.2 per cent as against 7.6 per cent. One of
the factors behind this decline has been the lower
than targeted spending by the Government, which
has also a carry-over spending lag from FY24.
On deeper analysis, it appears that the 12 per cent
decline in the first eight months of 2024-25 is
primarily the result of slowdown in roads and
defence spending. These two sectors constituted
40 per cent of total capex outlays. Capex on road
construction has been short by 16 per cent while
defence has seen a shortfall of 15 per cent. In the
eight months to November 2024, there is an
estimated shortfall of around `400 billion.
Only 3,100 km of roads have been awarded and the
construction during the nine-month period has been
5,853 km at the rate of 21.28 km per day. Although
the last quarter, as per past experience, has always
led to an acceleration, this year will turn out to be
quite a disappointment.
Despite the lag in capex in government
spending, our public enterprises have done well as
they reported 24.2 per cent increase in capex
compared to the previous year, reflecting their
contribution to driving economic growth and
infrastructure development. By the end of
November 2024, they had already achieved
57 per cent of the FY2024-25 target, with capex
achievements surpassing 100 per cent and
108 per cent of estimates in FY2022-23 and
FY2023-24, respectively.
Although they have been constructed at a greater
pace, rural roads are facing an operations and
maintenance default. It is advisable to concretise
these roads so that the connectivity of rural to urban
areas is more permanent in nature and not subject
to the vagaries of the monsoon and floods that wipe
out their source of livelihood.
The Jal Jeevan Mission has transformed rural lives
鈥� the number of water connections from 32.3 million
in 2019 has reached 152.9 million connections
by November 2024. Yet the failure to pay
contractors is causing a lot of heartburn. The
amounts are not large and the Government is
unnecessarily getting a bad name. When on one
hand capex spending has been inadequate, these should hardly be pending. Assam and Kerala are
facing bitterness over these dues.
A new case study by Oxford鈥檚 Sa茂d Business
School, supported by the Gates Foundation, titled
From Gridlock to Growth: How Leadership Enables
India鈥檚 PRAGATI Ecosystem to Power Progress,鈥�
spotlights PRAGATI (Pro-Active Governance and
Timely Implementation) as a digital governance
gamechanger. Since March 2015, it has
expedited over 340 critical projects worth
$205 billion, underscoring its pivotal role in
accelerating development.
Projects included 50,000 km of National Highways
and the doubling of the country鈥檚 airports. Much of
the focus rested on roads, railways and power plants
鈥� core drivers of economic growth. This targeted
approach resolved bottlenecks and maximised
returns, with RBI and National Institute of Public
Finance and Policy studies showing a GDP gain of
Rs.2.5鈥� Rs.3.5 for every rupee invested in infrastructure.
There is enough evidence to show that economic
growth is tied to acceleration in investment in
infrastructure, but it is equally important that we make
effective use of that investment such that projects are
completed and not left halfway or 鈥�90 per cent鈥�
complete, else the returns falter drastically.
Given the state of tardiness in project
announcements, including roads and highways, the
Government ought to demonstrate that PM Gati
Shakti has indeed accelerated DPRs and, therefore,
project execution has stepped up. The benefits from
PM Gati Shakti can lead to real 鈥楶ragati鈥�.
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