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Key challenges are efficient utilisation of allocated funds, timely completion of projects, and a balance between urban and rural development.

India’s ambitious vision to achieve developed nation status by 2047 hinges on a transformative journey through infrastructure development. This journey is not merely about constructing highways or erecting skyscrapers; it is about building the backbone that will support sustainable, climate-resilient, and inclusive growth. With an allocation of 3.3% of GDP for infrastructure in 2024, amounting to Rs 11.11 trillion, India is making a significant bet on its future. But is this enough to address the myriad challenges and leverage the opportunities that lie ahead?

The 2024-25 Union Budget outlines a comprehensive plan with a focus on transport and logistics, critical to the Viksit Bharat vision. The goals are lofty: a national highway grid of 2 lakh kilometres by 2025, increasing the number of airports to 220, and operationalising 23 waterways by 2030. This plan is supported by a budgetary increase from Rs 3.7 trillion in 2023 to Rs 5 trillion in 2024, signalling vast opportunities for private-sector investment through public-private partnerships (PPPs).

PPPs are already transforming India’s infrastructure landscape. From the construction of airports and ports to highways and logistics parks, private sector involvement is crucial. The PM Gatishakti National Master Plan, launched in 2021, aims to enhance multimodal connectivity across economic zones. With 15,580 projects valued at $2,388.93 billion, the plan is as ambitious as it is necessary. The National Logistics Policy further aims to develop integrated infrastructure and improve service efficiency, reducing logistics costs from 13% of GDP to the global average of 8% by 2030.

India’s infrastructure initiatives are showing promising results. The Bharatmala Pariyojana, aiming to develop 34,800 km of national highways, is in full swing. The UDAN initiative has enhanced air connectivity, launching 425 routes and revitalising 58 airports since 2016. Indian Railways has electrified 61,508 km of its broad gauge network and introduced 35 Vande Bharat Express trains, with more to come.

In ports, the Sagarmala scheme has reduced turnaround time to 0.9 days, outperforming countries like the US and Singapore. Plans are underway to increase port capacity from 2,600 million tonnes per annum (MTPA) to over 10,000 MTPA by 2047.

As India urbanises, with 40% of its population expected to live in cities by 2030, managing this growth becomes crucial. The Smart Cities Mission is pivotal, with 6,753 projects completed out of 7,991. Concurrently, rural areas are becoming increasingly connected, with 56% of new internet users by 2025 expected from these regions.

India’s infrastructure growth must be sustainable to ensure long-term prosperity. The National Infrastructure Pipeline targets completing projects worth $1.4 trillion by 2025, with 21% investment from the private sector. This includes green infrastructure, renewable energy (RE) projects, and sustainable urban mobility solutions.

Transportation, a significant contributor to greenhouse gas emissions, is a primary focus. India is adopting sustainable practices, such as constructing highways using waste plastic and integrating precast material to reduce emissions. Airports are transitioning to green energy, with the Airports Authority of India aiming for net-zero emissions by 2030.

Railways are also making strides towards sustainability, with plans to achieve net-zero emissions by 2030 through electrification and the introduction of bio-toilets in passenger coaches. Ports are increasing use of RE, with a goal of 90% by 2047, and developing green hydrogen bunkering services.

The Budget’s 11.1% increase in infrastructure spending, along with projections indicating a rise in capital expenditure to Rs 49.58 trillion by 2047, underscores the government’s vision for a prosperous India. This aligns with the goal of a $5-trillion economy by 2025.

However, the road ahead is fraught with challenges. Effective implementation, overcoming bureaucratic hurdles, and ensuring equitable growth across regions will require persistent effort and innovation. India’s success will ultimately depend on its ability to build not just infrastructure but a resilient, inclusive, and sustainable future for all citizens.

Key challenges include ensuring efficient utilisation of allocated funds, timely completion of projects, and a balance between urban and rural development. The government must also address environmental impacts, land acquisition issues, and the need for skilled labour to drive projects.

But one must ask: Are these targets achievable, or are they just another set of lofty goals?

The concept of Viksit Bharat is deeply interwoven with India’s infrastructure ambitions as laid out in the Budget. Such a transformation is not just about economic growth but also social equity, environmental sustainability, and technological advancement.

The integration of sustainable practices, digital connectivity, and private sector participation are pivotal. As India marches towards 2047, its infrastructure development will be a cornerstone of its vision for Viksit Bharat.

Is this vision achievable, or is it just another budget proposal? The numbers are promising, and the intent is clear. However, the real test will be in the execution. The momentum added by the 2024-25 Budget is a step in the right direction, but continuous effort, innovation, and collaboration will be key.

Are we ready to tackle the challenges head-on? Only time will tell, but one thing is certain: the path to Viksit Bharat is as much about vision as it is about action. And now, more than ever, India needs both.

Souryabrata Mohapatra is an associate fellow and Sanjib Pohit is Professor at NCAER. Views are personal. 

The UK’s newly minted National Wealth Fund (NWF) stands not merely as a state-owned financial entity but as a beacon of hope amidst climate challenges. Its mission: To secure a lasting reservoir of funding for climate resilience and sustainable economic growth. Much like a lighthouse, this state-owned investment fund promises to inspire confidence in the UK’s ability to chart a course towards a more sustainable future. The question remains: Will the NWF successfully guide the UK towards resilience and sustainability, or will it echo a foghorn, sounding bold yet lost in the murky maze of the political economy of state-owned funds?

The NWF’s long-term success is not a game of chance but a testament to robust governance and accountability. Effective governance is not just a requirement—it is the lifeblood of the Fund’s success and the UK’s future. Unfortunately, the Green Finance Institute’s Task Force report, which laid the groundwork for the NWF, downplayed these crucial aspects.

A well-governed, accountable national Fund is a priceless legacy for current and future generations. It promises to create enduring long-term value and wealth, free from short-term constraints. This is paramount as climate change and broader economic growth factors will leave their mark on countless future generations. High governance standards will offer reassurance about the NWF’s long-term impact and foster confidence in the future of a more resilient and prosperous UK economy.

Governance: The Cornerstone of Success

The performance and longevity of state-owned funds are inextricably tied to their governance. Studies have demonstrated that sound governance, marked by transparent decision-making, accountability mechanisms, and checks and balances, can enhance the performance of state-owned funds. Conversely, poor governance can result in inefficiencies, subpar performance, and scandals.

While state-owned investment funds in developed economies often operate with high transparency and adhere to stringent governance standards, governance mishaps occur, rapidly eroding public trust. Understandably, governance structures will differ across countries, influenced by their risk tolerance and institutional setup. However, these mishaps underscore the critical role of robust governance in ensuring the effectiveness of these funds.

While the Task Force’s report offers economic and financial assessment, it falls short of a guide on NWF governance. It lacks the depth and rigour necessary for managing a fund of such magnitude and national significance. This oversight is not merely a technical flaw but a fundamental weakness that could threaten the Fund’s long-term success.

Four Critical Governance Gaps

The report lacks a clear framework for the Fund’s mandates and objectives. A well-defined mandate is crucial, serving as the cornerstone for guiding investment decisions and aligning the Fund’s activities with national priorities. The absence of clear objectives can lead to discretionary decision-making and strategic drift, potentially undermining the Fund’s effectiveness.

Effective oversight is another aspect that warrants due importance. The report’s proposed oversight mechanisms should have been more robust to safeguard the Fund’s integrity and performance, as it lacks detailed provisions for independent audits, regular performance evaluations, and stringent accountability measures. Without these, the risk of financial misconduct and corruption escalates.

The NWF’s success is contingent on the trust and support of various stakeholders, including the public, private sector, government entities, academia, public commentators, and the global community. The Task Force report needed to address how the Fund will effectively manage and engage with stakeholders. Transparent and inclusive stakeholder engagement processes ensure broad-based support and mitigate potential conflicts of interest.

The existing governance model, a compromise product, could undermine the Fund’s autonomy and efficacy. This compromise raises significant concerns about the Fund’s vulnerability to political interference, potentially leading to suboptimal investment decisions and jeopardising the Fund’s mission.

Striking the Balance: Speed to Market and Robust Governance

In the NWF context, the ability to swiftly mobilise investable funds and seize opportunities that align with public interests is crucial. However, the bedrock of this philosophy is robust governance. Accountability must be enforced to address delays, inefficiencies, and missed opportunities. Striking a balance between these two aspects is vital for creating enduring financial value and fostering a more resilient and prosperous UK economy.

Given the NWF’s nature and mandate, robust governance is non-negotiable. Unlike a traditional sovereign wealth fund (SWF) that focuses on wealth creation through market-based investments, the NWF, as currently envisioned, will function more as a policy-based financing vehicle. The Fund is designed to serve as a long-term financial reservoir, investing in assets that generate future returns and provide UK citizens with climate resilience. This long-term horizon necessitates a robust governance framework insulated from political fluctuations, sudden policy changes, government turnovers, and short-termism. The focus should be on enduring sustainability, not just immediate gains. The Fund’s mandate to promote sustainable economic growth further underscores the need for governance structures prioritising strategic, forward-looking decision-making.

Global Trend: Autonomy and Higher Governance Standards

Globally, state-owned funds and investment vehicles are moving towards greater autonomy and enhanced governance standards. This trend reflects a growing recognition of the need to build public trust and credibility and insulate these funds from short-term political or bureaucratic opportunism. Many countries are reforming their sovereign wealth funds and state investment arms to adopt best governance practices, emphasising transparency, accountability, and professional management.

Given the UK’s well-established values of openness and partnerships, a constitutionally independent intergenerational fund would be a promising idea and a necessary change. It would augment the traditions of transparency and accountability the UK has espoused globally for centuries. Such an independent fund would be explicitly designed to create enduring value, free from political interference, and aligned with intergenerational equity and sustainability goals. The urgency of this change cannot be overstated.

Macroeconomic and Financial Stability Issues

It must be recognised that strong governance is also necessary as the NWF, as a state-funded and policy-based investment fund, will have several macroeconomic, fiscal, and market implications. The NWF could influence the UK’s macroeconomic stability. If the Fund’s investments generate substantial returns, it could boost economic growth. However, if the investments underperform, it could lead to financial losses and potential fiscal and budgetary instability. The NWF will also have to consider the impact of its funding and investment decisions on financial stability and the City of London and closely coordinate with other agencies, including the Bank of England. Good governance will require safeguards that prevent the NWF from adversely affecting the UK’s budgetary balance and forcing the government to increase its contributions, potentially leading to higher public debt and market destabilisation.

Governance Design of the NWF: A Blueprint

To rectify the governance deficiencies, the architects and legislators of the NWF should consider the following four pillars:

Define Clear Mandates and Objectives: Establish a detailed and explicit NWF mandate that outlines its strategic goals, risk tolerance, and investment horizon. This mandate should be enshrined in legislation to ensure consistency and long-term adherence.

Enhance Oversight and Accountability: Implement rigorous oversight mechanisms, including an independent supervisory board, regular external audits, and transparent reporting practices. An independent body should periodically evaluate the Fund’s performance and compliance to ensure accountability.

Facilitate Inclusive Stakeholder Engagement: Develop a comprehensive stakeholder engagement strategy that includes regular consultations with key stakeholders, public disclosure of investment activities, and mechanisms for incorporating stakeholder feedback into decision-making processes.
Ensure Autonomy from Political Interference: Design the governance structure to safeguard the Fund’s autonomy. This includes a clear separation between the Fund’s management and political entities, statutory protection against political influence, and the appointment of experienced, non-partisan professionals to critical positions.

A Final Observation

The UK’s NWF can transform the nation’s economic and financial landscape. It could bolster stability in the broader economy and restore financial equilibrium. Conversely, the NWF could become a public financial liability. Therefore, the NWF’s governance framework and autonomy quality are crucial. Policymakers must address the governance gaps identified above. By adopting a governance model prioritising transparency, accountability, and independence, the UK can ensure its NWF becomes a pillar of sustainable prosperity and financial stability.

The stakes are high, and the NWF’s governance must rise to this critical challenge. The most promising path forward is a constitutionally independent intergenerational fund focused on enduring value creation. Given the uncertainties and the need for the Fund to outlast electoral cycles, robust and independent governance is essential. Let the NWF become an intergenerational beacon of the UK’s resilience and future growth.

Udaibir Das, Global Macrofinancial Advisor & Strategist, Distinguished Fellow, Senior Advisor, and Visiting Professor

Udaibir Das is a former Assistant Director at the IMF, Senior Advisor to the International Forum of Sovereign Wealth Funds, Bretton Woods Committee Member, and Visiting Professor at the National Council of Applied Economic Research. He advises the Bank of England, is a Distinguished Fellow at ORF America, serves on the Advisory Board of the Kautilya School of Public Policy, and lectures at the University of Navarra and COMESA Monetary Institute. Views are personal.

The Union Budget 2024-25 increased the allocation of agriculture by 4.6%, i.e., Rs 1,32,469.9 crore from Rs 1,26,665.6 crore in the Revised Estimates (RE) of 2023-24. However, if we include allocation for the allied sector as well, the total allocation becomes Rs 1,39,607.5 crore. 

Agriculture is considered backbone of the economy, with a little over 18% share in current GDP, but employing over 42% workforce. In this scenario, the allied sector’s contribution is more promising and on the rise amidst the buoyant performance of the overall agriculture. Among livestock sector, dairy is one of the proficient areas that needs critical focus. Though India is having highest production of milk, milk yield per animal and quality of milk continued to be a concern.

The Budget 2024-25 has been proven beneficial for the allied activities. The government has allocated a budget of Rs. 4521.2 crores for Department of Animal Husbandry and Dairying (DAHD) whereas, for Department of Fisheries (DoF), the budget allocation is Rs. 2616.4 crores. A remarkable rise of around 15.5% (compared to 20223-24 RE) in the budget allocation can be witnessed for DAHD. Similarly, DoF has also been able to get more funds for its development by quite a high margin of 53.8% (compared to 2023-24 RE). Overall, percentage change for this Ministry in terms of increment in the budget allocation has been observed to be 27.12% compared to 2023-24 RE.

From the Expenditure Profile of DAHD, it is inferred that the Government is aiming towards giving more importance to the Institutions as they play a vital role in advancing dairy production, animal health, and related activities. Moreover, sectoral competitiveness can be achieved only through the supply of skilled workforce as a critical success factor and also for creating social impact.  From the data, we can observe that there has been a significant increase in the budget allocation for Institutes by 9.8% compared to 2023-24 RE. What is noteworthy is that the Government is in cognizance of the fact that for growth of the economy, providing employment opportunities is of utmost importance and this sector is fully capable of employing people with certain qualifications, and skills. Therefore, by investing in these Institutes, it is ultimately supporting enterprise activities and paving the way for a seamless adoption of technologies which is yet to unleash the full potential of this sector. 

For the schemes, the government has been repeatedly increasing the budget allocation YoY. If we compare the data, we can witness that there was a massive increase by about 112.3% in the budget allocation for Central Sector Schemes (CSS)/projects from RE 2023-24 to BE 2024-25, which is a huge jump from 77.4% recorded in the past year.

Remarkable changes can be observed for Dairy Development and Rashtriya Gokul Mission as after a couple of years, the Centre has allocated a sum of Rs. 371 crores and Rs. 700 crores each under CSS. Prior to FY2024-25, they were being provided funds under CSS. Dairy Development Project serves an imperative role in enhancing the milk quality and production. It concentrates on building and enhancing the infrastructure for high-quality milk testing equipment and promote dairy cooperatives. This also aids in encouraging more rural women to form SHGs and enter this sector as Dairy Entrepreneurs and thereby empower women.

The Rashtriya Gokul Mission Scheme holds similar significance in the preservation of India’s native bovine breed. By funding this program, they hope to increase the productivity of the cows by introducing cutting-edge technologies and cutting-edge scientific techniques like artificial insemination. If this plan is successful, dairy technology will see a technological advancement. This would encourage more skilled professionals to join, particularly women, and contribute to the growth of the cattle industry, which would help small and marginal farmers.

Despite being the world’s largest producer of milk, India accounts for only o.25% of the world’s total dairy exports, amounting to just $272.65 million with Germany leading the trade by a humongous margin (Eximpedia, 2024). One of the prime reasons being the unused potential of the bovine population. A latent prospect lies in the field of technology and science which can boost the productivity and increase the milk yield. The key is to provide training and knowledge dissemination among the workers to encourage innovation in milking techniques. This would encourage cost-efficiency and prove to be lucrative from the trade aspect.

The dairy industry’s success and sustainability are of utmost importance, and this budget could turn out to be a foothold in this direction by investing and strengthening the existing institutions and further promoting skilling among the workers that could generate performance-driven effort to redefine the sector and establish new benchmarks.

Saurabh Bandyopadhyay is Senior Fellow, Jigisha Sharma is Research Intern and Shalini Aggarwal is Executive(Research Projects) at NCAER. Views are personal.

A more equitable and sustainable strategy is needed – one that recognises the interconnected nature of climate, development, and consumption.

India, the world’s third-largest emitter of greenhouse gases, finds itself at the crossroads of development and environmental sustainability. The global approach to climate change, heavily focused on reducing carbon emissions through renewable energy adoption, overlooks India’s unique socio-economic and geographical challenges. This one-size-fits-all strategy is fundamentally flawed and could undermine the effectiveness of India’s climate efforts, as argued in the Economic Survey 2023-24.

The global strategy to combat climate change revolves around climate adaptation and mitigation, with an emphasis on renewable energy, energy efficiency, and cutting methane emissions. While these goals are attainable for developed countries, they are far more challenging for India. The country’s population exceeds 1.4 billion, and the demand for energy to fuel its development is immense. Despite this, India’s per capita emissions remain at around 2.8 tons of CO2 equivalent per year, compared to 8 tons in the EU and 16 tons in the US.

Renewable energy sources such as solar and wind are often seen as the ultimate solution to climate change. However, the transition to renewables is not without significant challenges. For instance, the production of solar panels and wind turbines requires substantial amounts of rare earth metals like lithium, cobalt, and nickel. These materials are primarily extracted from countries with poor labor and environmental standards. The extraction process is energy-intensive and environmentally destructive, leading to a paradox where the pursuit of clean energy contributes to environmental degradation.

Moreover, renewable energy sources are intermittent. Solar and wind power generation depends on weather conditions, necessitating substantial storage capacities to ensure a stable power supply. This storage requirement further exacerbates the environmental impact, as battery production involves additional mining and resource extraction.

India faces a unique set of challenges in its quest to reduce carbon emissions. The country’s heavy reliance on coal for industrial processes, power generation, and transportation makes transitioning to cleaner energy sources particularly difficult. Approximately 70% of India’s electricity comes from coal, highlighting the scale of the challenge.

The financial burden of this transition is another major hurdle. Developing countries like India require approximately $6 trillion by 2030 to meet their climate targets. However, only $100 billion was pledged by developed nations till 2020, with an actual provision of just $83.3 billion. This financing gap makes it nearly impossible for India to make the necessary investments in clean energy infrastructure and technology.

A critical flaw in the current climate strategy is its failure to address overconsumption in developed countries. High-income nations are responsible for the majority of global emissions, with the top 10% of emitters averaging 22 tons of CO2 per year, over 200 times the emissions of the bottom 10%. Despite this, the focus remains on technological solutions rather than addressing the root cause of the problem: excessive consumption.

For instance, the average American consumes 12,700 kWh of electricity annually, compared to just 185 kWh in Africa. This disparity underscores the need for a more holistic approach to climate action that includes lifestyle changes and reduced consumption in developed countries, alongside technological advancements.

India must advocate for a climate strategy that reflects its developmental needs and capabilities. This involves investing in clean energy technologies that are suited to its unique context, such as small-scale solar and wind projects, improving energy efficiency in industries, and promoting sustainable agricultural practices. Additionally, India should leverage its position as a leader in the Global South to push for more equitable climate policies that hold developed nations accountable for their historical emissions and current consumption patterns.

To truly address the climate crisis, the global community must adopt a more nuanced and equitable approach. This includes recognising the historical emissions of developed countries and providing adequate financial and technological support to developing nations. It also means shifting the focus from merely substituting fossil fuels with renewables to promoting sustainable consumption and lifestyle changes.

The current global approach to climate change is fundamentally flawed and insufficient to address the unique challenges faced by India. A more equitable and sustainable strategy is needed – one that recognises the interconnected nature of climate, development, and consumption and provides the necessary support for all nations to achieve their climate goals. India’s climate strategy must be rethought to ensure that it is not only effective but also just and inclusive, allowing the country to continue its development while contributing to global climate efforts.

Souryabrata Mohapatra is an associate fellow at NCAER in New Delhi.