We now possess a robust platform on which to grow value in a
sustainable manner in the long-term
Overview
The big picture I wish to leave you with is the Indian government's
infrastructure expenditure programme.
To explain the background and its impact, it would be necessary to step
a year into the past.
In the 2022 Union Budget of India, the Finance Minister announced an
increase in the capital outlay for infrastructure projects to H5.54 Lakh Crore. In the
2023 Union Budget, the Finance Minister enhanced allocation with a H10 Lakh cr outlay for
infrastructure. In the second successive Union Budget - Union Budget 202324 - the
government announced a 33% increase in the capital outlay for infrastructure programmes.
The two Union Budgets combined enhanced the outlay for infrastructure capital expenditure
programmes from H5.54 Lakh cr for FY 2021-22 to H10 Lakh cr in FY 2023-24..
Most observers saw in this decisive increase two perspectives: one,
they perceived a refreshing break from the past when increases would be in single digits
or low teen percentages; two, they conjectured that perhaps the sharp increase was
proposed to lift the country out of the gloom of the pandemic. This indicates that even as
it took India 73 years to reach an infrastructure outlay of H5.54 Lakh cr until FY
2021-22; it took the country just years to add another H5 Lakh Crore.
New journey
These two years, when India has proposed to add 30% to its
infrastructure outlay, represent the start of a new journey in India's economic history
for the following reasons.
For decades, India was principally a consumption-driven economy. Much
of the country's growth was generated from its growing population, increasing aspirations
and evolving lifestyles. This
consumption-driven growth transpired despite an extensive
under-investment in India's infrastructure. Even as personal incomes grew, the growth of
India's infrastructure continued to be muted.
Then came the Union Budgets of FY 2022-23 and FY 2023-24. These two
Budgets represent a landmark and structural shift. They will accelerate the transition of
India from a consumption- driven economy to a consumption cum infrastructure-driven
economy.
This transition will emerge as a capex multiplier - from one government
raising the infrastructure investment bar to thousands of companies doing the same across
the breadth of the economy. This transition will result in the building of a larger number
of infrastructure drivers like roads, ports, airports, bridges, waterways and mobility, a
development likely to be compressed within a few years.
When you have the rest of the world fearing a slowdown and even a
recession, the reality is the reverse in India. India is growing faster than any major
economy ,even as much of the world is slowing. This correction will - among other things -
reduce India's logistics cost as a percentage of the GDI, enhance export competitiveness,
increase forex earnings and widen employment.
Preparedness
To capitalise extensively on this infrastructure revolution that is
beginning to unfold, there will be a premium on the governance preparedness of companies.
At GPT Infrastructure, we have made responsible governance central to
our existence. Our Board of Directors comprises a balance of Independent
In the 2023 Union Budget, the Finance Minister enhanced infrastructure
allocation with a ?10 Lakh Crore outlay.
and non-Independent Directors. The Independent Directors comprise
professionals and achievers of standing. The Board has been clustered across focused
committees, deepening specialisation and responsibility. The Nomination and Remuneration
& Audit committees comprise only Independent Directors, representing strong corporate
governance.
The company progressively strengthened its transparency and disclosures
in the Annual Report
and quarterly presentations. It strengthened the business architecture
around systems and processes, enhancing systemic predictability.
It made live a new HR platform for better communication, interactions,
competencies, empowerment, career growth and retention. Its social responsibility has
extended from being strictly a corporate function to employee volunteering.
The result is that the GPT Infraprojects of today is attractively
placed to
enhance value for all its stakeholders. The Balance Sheet is getting
lighter, the order book larger and the margins guardrail more predictably profitable. We
believe that we now possess a robust platform on which to grow value in a sustainable
manner into the longterm.