Government Spending on Infrastructure Rises, but Private Sector Participation Lags
India’s infrastructure development is making significant strides, but it is still grappling with challenges, despite increased government spending. According to the 2024-25 Economic Survey, while the Union government’s capital expenditure on major infrastructure sectors has grown at an impressive 38.8% from FY20 to FY24, private sector participation in core sectors remains limited, raising concerns about the pace of overall development.
The survey points out that the National Monetisation Pipeline (NMP) initiative has secured ₹3.86 lakh crore in transactions against a target of ₹4.30 lakh crore for FY22-24. This highlights the government’s continued effort to monetise assets and boost funding for infrastructure projects, but it also points to a gap between the government’s aspirations and the actual participation from private players. One key area of concern has been the decline in average monthly capital expenditure, which fell to ₹0.60 lakh crore in the first quarter of FY25 from ₹0.66 lakh crore during the latter part of 2024. Factors such as the model code of conduct during the general elections and the impact of heavy monsoon rains slowed down infrastructure spending, although the recovery was notably better than during the 2019 elections. In terms of sectoral performance, the Ministry of Ports and Shipping has led in budgetary utilisation, hitting 76%, followed by civil aviation and railways at 69% and 67%, respectively. However, the Ministry of Housing and Urban Affairs lagged behind, showing only 49% progress in terms of spending.
The railways sector, despite these challenges, has seen positive growth. Network expansion has remained stable at approximately 2,000 kilometres, with 17 new Vande Bharat train pairs and 228 new coaches added. The introduction of electronic interlocking systems at 3,576 stations and automatic block signalling across 720 route kilometres has contributed to enhancing safety. Additionally, the Mumbai-Ahmedabad High-Speed Rail Project has made significant progress, with 47.17% of the work completed. Urban development also witnessed progress. Housing demand in India is expected to rise sharply, reaching 93 million units by 2036. In FY25, 600,000 houses were approved under the Pradhan Mantri Awas Yojana – Urban (PMAY-U) 2.0, with 89 million houses completed since 2015. Metro rail networks, a key component of urban infrastructure, grew by 62.7 kilometres, expanding the operational length to 1,010 kilometres nationwide.
Highway construction saw a slight decline, with 5,853 kilometres built in April-December FY25, compared to 6,215 kilometres in the same period the previous year. However, the expansion of high-speed corridors has been noteworthy, growing from 93 kilometres in 2014 to 2,474 kilometres by 2024. Similarly, 4-lane and above National Highways have increased from 18,300 kilometres to 45,900 kilometres in the same period. Port efficiency also saw marked improvements, with capacity rising from 3 million tonnes per annum to 21 million tonnes between FY24 and FY25, reducing container turnaround times from 48.1 hours to 30.4 hours. In the power sector, India’s installed capacity grew by 7.2% year-on-year, with renewable energy capacity reaching 209.4 gigawatts by December 2024, now constituting 47% of total installed capacity. In terms of water infrastructure, the Jal Jeevan Mission achieved significant success, with eight states and three union territories reaching 100% coverage for piped drinking water by November 2024. Overall rural coverage increased from 17% in August 2019 to 79.1% by the end of 2024.
Despite the positive strides, challenges persist, particularly in accelerating private sector involvement and maintaining consistent momentum across sectors. Jagan Shah, CEO of The Infravision Foundation, highlighted the importance of improving urban infrastructure to support economic growth. “Urban unemployment is reducing significantly, which testifies to the economic importance of cities,” he said, emphasising the need to focus on social infrastructure and public transport. India’s infrastructure journey is far from complete, but the government’s efforts and investments over the past few years have undoubtedly laid the groundwork for future development. To maintain this momentum, the country will need to address the remaining gaps, including the underperformance of certain sectors, and foster greater collaboration with the private sector to meet its long-term infrastructure needs.
