The Union Budget 2025 is a crucial time as India gets ready for more infrastructure development in order to fund its ambitious plans for transport expansion. The government must balance funding new development in an economy that is changing with maintaining the infrastructure that already exists. John F Kennedy, the former US President once said, "American roads are not good because America is rich, but America is rich because American roads are good." This fabulous statement has been reiterated by Nitin Gadkari - Union Minister of Road Transport and Highways - numerous times. What Gadkari meant here was the importance of roads which are not only a means of travel, but play a critical role in any country’s economic growth.
Highway Finance: A Change in Strategy
The departure from the Bharatmala model heralds a new strategy for funding the construction of highways. The government has embraced a more agile project-by-project approach instead of committing to broad umbrella initiatives. This approach enables better risk management and more focused resource allocation, which is especially important given the recent challenges with project execution and cost escalation.
The toll revenue stream remains an important financing pillar. Since 2000, highway tolls have generated Rs 2.1 trillion in revenue, with private companies accounting for Rs 1.4 trillion of that total. Over the last 25 years, the industry has grown at a compound annual growth rate of 12%, transforming highways from a basic piece of infrastructure into a highly sought-after asset class.
India's infrastructure development reached a turning point at the start of the twenty-first century. From humble beginnings to massive megaprojects, the country's journey over the past 25 years has been marked by incredible advancements, enduring difficulties, and unrealized potential.
Phase 1 of the National Highways Development Program was introduced by Prime Minister Atal Bihari Vajpayee in December 2000, laying the groundwork for contemporary Indian infrastructure. The golden quadrilateral project, which was revolutionary at the time, set the stage for a change that would eventually affect the entire country. With a total length of 146,000 kilometers and contemporary features like access-controlled motorways and GPS-based toll collection systems, the national highway network has almost tripled in size.
Recent events, however, suggest some challenges. The ambitious Bharatmala project, worth Rs 10 trillion, has been put on hold because of cost overruns and bureaucratic delays. Although a replacement program called Vision 2047 was suggested, it has also been shelved as the government shifts to a project-by-project strategy. By the end of fiscal year 2025, experts at SBICaps estimate that highway contract awards will total 8,500 kilometers, despite these setbacks.
“Major projects in the Bharatmala pipeline and new expressway projects are being taken up by the Union Cabinet on a project-to-project basis, and will be sanctioned in a scattered manner,” a senior government official said.
Railways: A Mixed Track Record
The railway industry provides a more complex picture. While passenger amenities and technological capabilities have improved, core infrastructure development has been slow. Since 2000, the railway network has added an average of 231 kilometers of new routes per year, or less than one kilometer per day. This pace is especially notable when compared to the colonial era's faster expansion.
The Indian Railways network had not improved much since independence when Mamata Banerjee, the Vajpayee government's railway minister at the time, unveiled the first railway budget of the new millennium in 2000.
“When India attained freedom in 1947, we had about 54,000 kilometres of railway network in the country. Today, on February 25, 2000, the network has a length of 62,800 route kilometres. In 53 years, independent India has added less than one-fourth of what was built in 94 years of colonial rule,” Banerjee had said in her speech.
However, India's first bullet train project in 2024 was a turning point. The state-owned company BEML has been given the contract to supply trainsets that can travel up to 280 km/h by 2026. Even though the overall accident rate is dropping, recent incidents like the Kanchenjunga Express crash have sparked worries about operational safety.
The financing strategy for the highway sector must change to accommodate both short-term and long-term goals as India works to become a $30 trillion economy by 2047.
Ports Ambition and Aviation Growth
From traditional operations to highly automated, technologically driven processes, the port industry has experienced a remarkable transformation. By 2047, India hopes to rank among the top five shipbuilding countries in the world owing to the government's ambitious plan to invest Rs 54 trillion. The recent global supply chain disruptions brought on by international conflicts have made this strategy even more pertinent.
“Over the past 25 years, the port industry in India has undergone a remarkable transformation, evolving from traditional, labour-intensive operations to highly automated, technology-driven processes,” said Ravinder Johal, Chief Operating Officer, Ports & Terminals (Operations and Commercial), MENA and Subcontinent, DP World.
“Going forward, the key to further growth lies in creating integrated supply chains that link ports to hinterland logistics hubs, utilising rail, road and shipping networks for seamless movement of goods,” he added.
The aviation industry has also grown rapidly. From 3,568 domestic flights per week in 2000, India now has approximately 22,484 weekly flights. The market has shifted dramatically from full-service carriers to low-cost models, with IndiGo and the privatized Air India now accounting for more than 90% of domestic passenger traffic. Their recent massive aircraft orders -- 500 for IndiGo and 570 for Air India -- highlight the sector's growth potential.
“The future prospect of the Indian aviation sector is bright and it is very much possible that new airlines will take birth to challenge the dominance of the two carriers. While many have gone bankrupt, many continue to find the Indian aviation sector to be glamorous,” a sector veteran said.
Looking ahead: The 90 Percent challenge
Despite these achievements, a sobering perspective is provided by NITI Aayog CEO BVR Subrahmanyam's recent observation, wherein, 90 percent of India's infrastructure still needs to be constructed if the country is to reach $30 trillion in GDP by 2047. This challenge presents both an opportunity and a responsibility for policymakers and industry stakeholders. As we enter 2025, a few significant projects must be completed. The ambitious India-Middle East Europe Economic Corridor, the development of megaports in Galathea Bay and Vadhavan, and the construction of the Rs 1 trillion Delhi-Mumbai Expressway are all reflective of India's infrastructure goals. The completion of these projects, along with improvements in operational efficiency and safety standards, will have a significant impact on the direction of India's infrastructure.
As India attempts to bridge the infrastructure gap and achieve its economic potential, the next 25 years will probably be even more crucial. In addition to financial investment, success will require creative project execution techniques, sustainable development methods, and a balanced focus on asset upkeep and new construction.
Looking Forward to 2025 and Beyond
The budget must address a number of key priorities:
1. Project Pipeline Funding: Despite a slower pace in recent months (1,152 km as of August), SBICaps predicts 8,500 km of project awards by the end of FY25, indicating a significant need for funding.
2. Maintenance and Upgrades: It's critical to set aside funds for upkeep of the network's current infrastructure as it grows.
3. Technology Integration: Different funding sources are required for investments in contemporary amenities like GPS-based toll collection systems.
4. Risk Mitigation: Based on prior experiences with initiatives like Bharatmala, the budget should include procedures to handle cost escalations and project delays.
Conclusion
Budget 2025 represents a turning point in India's infrastructure development. The shift to a project-by-project strategy might seem more cautious than earlier bold initiatives, but it might offer a more viable course of action. Finding the right balance between the need for ongoing infrastructure development and fiscal prudence will determine success.
The financing strategy for the highway sector must change to accommodate both short-term and long-term goals as India works to become a $30 trillion economy by 2047. This crucial foundation can be established in the 2025 budget, opening the door for the subsequent phase of India's infrastructure development narrative.
