Budget 2022 Sectoral Pick: Spending on railways may rise; NIP to create cushion, analysts expect

Several analysts believe that the government is likely to increase its expenditure on Railways in the upcoming Union Budget 2022, with overall rise in infrastructure spending. The Union Budget 2022-23 is scheduled to be presented on February 1 by finance minister Nirmala Sitharaman in Parliament. 

Axis Securities in its Budget 2022 expectations said that the spending efforts are likely to continue around Defense, Railways, and road infra development. “Allocation of railways has increased by 52 per cent over FY21 BE (Budget Estimates) and allocation of Rs 1,10,054 crore for the current fiscal," the brokerage stated.  

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With capex cycle coming back, the government has articulated railways, renewable energy, water sources, roadways to be notable targets for expansion of capex layout, the brokerage said. 

While ICICI Direct sees the railways expenditure likely to rise by 22 per cent year-on-year to Rs 1.3 lakh crore in the upcoming Budget. The government between 2022-2025 is expected to monetise around Rs 1,52,496 lakh crore railways asset under national asset monetization plan, it said. 

The domestic brokerage also says, “Under Railway Station Redevelopment Programme, aim is to redevelop 400 railway station across India at around Rs 1 lakh crore through PPP (public-private partnership) mode. 

Apart from core infrastructure sectors such as roads, highways and railways, logistics can be a key focus area to ease transportation costs and reduce the elevated logistics across the country, the rating agency firm ICRA said in its Budget 2022 expectations. 

“We may see some additional allocation towards Ministry of Road Transport and Highways as well as the Ministry of Railways in the FY2023 Budget, whereas any large/meaningful increase in the capital outlay for Defence Services is unlikely, in our view,” the rating agency said in its expectations note. 

Similarly, brokerage house ShareKhan said “With the recently-unveiled National Infrastructure Pipeline and government stress to strengthen railway and urban infrastructure. Higher allocation of capital expenditure is expected in current Budget FY2021-22.” 

Terming it as positive move, the brokerage said, “This will provide further momentum to railway expenditure and fasten the government initiatives to strengthen the railway infrastructure such as electrification of railways, more of Rapid Regional Transport System, modernisation of railway station, dedicated freight corridor among others.” 

This move is more likely positive for L&T, KEC International, Kalpataru Power Transmission among other stocks, the brokerage house also mentioned in a Budget preview.