India eyes new urea plant, hikes infrastructure capex, cuts taxes
Priya Jestin
03-Feb-2025
MUMBAI (ICIS)–India plans to build a new 1.27 million tonne/year urea plant in the eastern Assam state to cut its reliance on imports, while the government allocating a bigger infrastructure budget in the coming fiscal year ending March 2026.
- New plant – eighth urea unit of same capacity to be built since 2019
- 2025-26 infrastructure budget at Rs11.2 trillion
- Tax cuts to boost consumption amid economic slowdown
“Our government had re-opened three dormant urea plants in the eastern region. To further augment urea supply, a plant will be set up at Namrup, Assam,” India’s finance minister Nirmala Sitharaman said during her budget presentation before parliament on 1 February.
This will be the eighth plant with the same capacity that will be built in the south Asian country since 2019. It is expected to reduce India’s dependence on urea imports.
In fiscal year ending March 2024, India’s domestic urea production was at 31.4 million tonnes, up 20% from the previous year.
Amid growing domestic capacity, imports of the material in January-October 2024 declined by 31% year on year to 4.1 million tonnes, official data show.
Separately, the government has announced plans to increase its capital expenditure on infrastructure projects by about 1% to Indian rupees (Rs) 11.21 trillion ($129 billion) for 2025-26.
While the government had initially allocated Rs11.1 trillion for infrastructure projects for fiscal year 2024-25, it brought down its allocation to Rs10.18 trillion in its revised estimate for the current year.
The government has allotted Rs2.72 trillion to the Ministry of Transport & Highways for the development of road infrastructure across the country.
The allocation for the Indian Railways has also remained unchanged at around Rs2.52 trillion which will help support the continued development and modernization of India’s rail networks.
“Infrastructure development remains a cornerstone of India’s growth strategy, with targeted investments to enhance connectivity and reduce logistics costs,” Sitharaman said.
The government also plans to extend Rs1.5 trillion in interest-free loans to states to support infrastructure projects.
This is expected to encourage public-private partnerships (PPPs) to develop new roads, highways and metro projects which will increase the consumption of construction-related segments such as cement, steel, paints and various chemical and petrochemical products.
Budget allocation for the National Green Hydrogen Mission has been doubled to Rs6 billion from the current fiscal year. It is expected to attract investment and help India achieve its goal of producing 5 million tonnes/year of green hydrogen by 2030.
Meanwhile, the government raised the starting point for income taxes to Rs1.2 million/year from Rs700,000/year previously.
“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” Sitharaman said.
The Indian government aims to keep its fiscal deficit at 4.4% of GDP in the current financial year 2024-25, which is in line with its aim to bring down the fiscal deficit to under 4.5% by 2025-26.
India’s GDP growth for 2025-26 is projected to range between 6.3% and 6.8%, according to the Ministry of Finance.
The projected GDP growth rate of 6.3-6.8% for 2025-26 will be the lowest since 2020-21, when India registered a negative growth of 5.8%. India’s GDP stood at 9.7% in 2021-22, 7% in 2022-23 and 8.2% in 2023-24.
India’s GDP is estimated to grow at 6.4% in the current financial year ending March 2025, down from earlier forecast of between 6.5% to 7% growth.
A slowdown is projected due to a weak manufacturing sector, persistent food inflation, and weak urban consumption combined with stagnant job growth.
Inflation is expected to decline in fiscal year 2025-26, with the Reserve Bank of India (RBI) projecting inflation to average at 4.6% and 4% in Q1 and Q2 of FY 2025-26, respectively.
Focus article by Priya Jestin
($1 = Rs87.15)
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