Data | Budget 2020: What's hindering India's infrastructure push?

The ambitious National Infrastructure Pipeline with a massive budget is getting bogged down by time delays and cost-overruns across many projects

According to Building and Other Construction Workers Welfare Cess Act, 1996, 1% cess should be deposited with the Labour Department on construction of every building with over ₹10 lakh outlay.

In December last year, Finance Minister Nirmala Sitharaman outlined plans to invest about ₹102 lakh crore on infrastructure projects by 2024-25. The five-year-long National Infrastructure Pipeline (NIP) will enter its second year in FY21, during which ₹1,950,397 crores are to be invested. The ambitious plan with a massive budget is getting bogged down by time delays and cost-overruns across many projects.

Infrastructure push

About ₹19.5 lakh crore has been budgeted during FY21 as part of the NIP. Urban infrastructure, road transport, energy and Railways account for about 70% of allocation this year. Graph shows % allocation under the NIP for FY21.

Time and cost overruns 

Ministry of Statistics and Programme Implementation analyses 1,676 projects around the country and reports time and cost overruns every quarter. At the end of quarter 2 of FY20, more than one-third of infrastructure projects were delayed and the overall original cost estimation of those projects had been overrun by 20%. Graph captures captures the cost overruns as a % of original estimates (blue line, left-axis) and % of projects with time overruns (red line, right-axis).

 

The graph shows that both time and cost overruns were relatively high around 2014 and gradually became better in the next few years. But, in FY19 and FY20 it has gone up again, thereby bogging down India's infrastructure push.

Sectoral comparison 

While the Railways and power sectors saw high allocation in the National Infrastructure Pipeline, a high share of ongoing infra projects in these sectors has been delayed as of Q2FY20. Graph shows cost overruns as a % of original estimates against % of projects with time overruns as of November 2019. Each circle denotes a sector.

 

The sectors in the top right quadrant saw both higher than average cost overruns and time overruns as of November 2019. For instance, Railway infrastructure projects have exceeded their original cost by 45% with 61% projects getting delayed. The sectors in the bottom left quadrant saw lower than average cost and time overruns.