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Infrastructure spending can help spur economic activity: KPMG

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NEW DELHI: As India faces its deepest recession since Independence, infrastructure spending can help spur economic activity and the involuntarily unemployed through job creation, global professional consulting services firm KPMG said on Tuesday.

The Rs 111 lakh crore National Infrastructure Pipeline (NIP) built on Infrastructure Vision 2025 should provide a timely stimulus to the economy, it said in a new report.

“Given the magnitude of COVID-19 pandemic and consequent pressure on resources, it is imperative that stakeholders reassess the priority of sectors and projects outlined in Infrastructure Vision 2025.”

Infrastructure spending is expected to have a multiplier effect on overall economic growth, primarily based on the Keynesian theory that aggregate demand can be reactivated by increasing public expenditure.

In addition, said KPMG, improved infrastructure will enhance the overall productive capacity of the economy and its global competitiveness.

Typically, infrastructure projects are characterised by high capital intensity and long gestation periods, often leading to a funding gap. Public investment is key to filling this gap.

“The government should take stock of the project pipeline and review its expenditure and financing programmes to obtain optimal results and impacts,” said Arun Kumar, Chairman and CEO of KPMG in India.

Closing the infrastructure funding gap calls for developing financing solutions and placing more emphasis on collaboration and shared responsibilities across public, private and non-governmental organisations.

A prerequisite to this is an enabling governance and policy framework that fosters business growth and investor confidence while rethinking innovative investment and funding models to encourage private sector participation.

Infrastructure Vision 2025’s strategic goals are aligned with those of the UN’s 2030 Sustainable Development Goals to improve the living standards of people.

The government now needs to focus on creating the conditions needed to secure funding for Infrastructure Vision 2025’s delivery, thus helping India cater to urbanisation-led requirements, said the report.

A well-planned pipeline and well-developed infrastructure can lead to the creation of valuable assets, build investor confidence, increase revenue and finance sources, grow businesses, generate employment, improve ease of living and enable inclusive growth, it added.

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