Indian Government Ramps Up Infrastructure Spending
The skyline in Mumbai, India. Source: Hardik Joshi
The Indian government drastically increased its infrastructure spending on public goods, such as roads, railways and bridges, for the foreseeable future. A report by Crisil, an Indian subsidiary of S&P Global, predicts that India’s infrastructure spending will reach $1.7 trillion USD in the next seven fiscal years leading up to 2030. By comparison, the government only spent $800 billion USD on infrastructure between the years of 2017 and 2023.
The money will be used to increase the scale and efficiency of railways, roads, and electrical grids, among other things, which would lead to an increase in the quality of life for the average Indian citizen. Simultaneously, a significant number of mega-scale projects, such as major ports and international airports, are scheduled to be constructed as well.
The surge in infrastructure investment is part of a long term strategy by the Indian government to promote economic growth in the country. At the start of this year, the government earmarked $120 billion in spending for infrastructure for the fiscal year of 2023. India’s finance minister, Nirmala Sitharaman, claimed the investments would help fuel job growth and economic productivity. Slow, inefficient transportation due to weak infrastructure previously hindered India’s goals of increasing manufacturing in the country, which may be alleviated by better transportation infrastructure.
The renewed focus on infrastructure investment is a boon for a country hoping to improve its efficiency in international markets. India has laid more miles of electrified railway than the United Kingdom (UK) or France, and new city metros are opening across the nation – networks that will prove invaluable for foreign companies looking to increase their manufacturing capacity in India. Private markets are excited about the renewed push for infrastructure, with major Indian banks raising around $3 billion USD from infrastructure bonds alone.
In part due to the effects of this massive spending increase, Crisil projects India’s economy to grow at a rate of 6.7% between 2023 and 2031, which is well above the worldwide median growth rate of 3.08% in 2022.
People queuing up for jobs. Source: AP Photo/Rajesh Kumar Singh
Indian Prime Minister Narendra Modi oversaw steady economic growth ever since he assumed office in 2014 – a fact that he has touted as a major achievement, promising similarly rapid growth in the future. However, Modi’s critics highlighted that despite the growing economy, unemployment rose. Said critics attribute the growth in the Indian economy to the ballooning profits of large conglomerates, such as the Reliance Group or Adani Group, and not to the growth of the middle class. Despite Modi promoting manufacturing through his “Make in India” scheme, the amount of manufacturing jobs in India halved in between 2017 and 2022.
The reliance on massive conglomerates to boost India’s economic growth is a concern with infrastructure investment as well. Six conglomerates control vast portions of India’s economy, with them collectively having a stake in over 25% of India’s port capacity and a third of steel making. A quarter of investment proposals since 2014 came from them alone. One of these conglomerates is the Adani Group, which is embroiled in scandal after accusations of stock manipulation and accounting fraud.
India saw a massive surge in economic activity at the onset of the 21st century. The GDP growth rate was estimated at 7.5% in 2007, one of the highest in the world at the time, and its economy now surpassed the UK to become the 5th largest in the world. Yet, its GDP per capita still sits at around $2,000 – well below the world average of $12,000. The Indian government’s infrastructure spending will be a net positive for the Indian economy as a whole. However, how much the economy’s growth will improve ordinary, working class Indians’ lives remains unclear.