As we near the end of COVID-19's acute phase, the global economy is struggling with the magnitude of the economic effect it will leave behind. According to a Cambridge study, the world economy could lose US$26.8 trillion, or 5.3 per cent, of global GDP in the next five years. According to the World Economic Forum, prolonged economic recession, bankruptcies and sector consolidation, the collapse of hardest-hit industries, significant unemployment, and restrictions on people and goods movement are the top five projected effects of the crisis. Governments throughout the world are putting together stimulus packages to stimulate both immediate and long-term economic growth, and they're increasingly focusing on shovel-ready infrastructure projects as one option.
Infrastructure has a history of being related to both immediate and long-term economic growth (in terms of creating jobs, generating earnings, and enhancing spending) (by increasing accessibility to employment, improving education opportunities through better connectivity, and increasing equality through access to critical utilities). To put this into perspective, according to a Business Roundtable research, every dollar invested in infrastructure results in an additional US$3.7 being infused into the economy over a 20-year period.
The COVID-19 problem has also highlighted our fragility and the need to build our resilience to future challenges to mankind, including climate change, with governments and businesses calling for stimulus packages to enable a green recovery. Infrastructure investments must be conditional on compliance with sustainability recommendations and climate targets if they are to be included in these packages. According to the OECD, infrastructure accounts for 60% of current global emissions, so the infrastructure we develop now will decide our capacity to reach the Paris Agreement's 2050 Net Zero targets.
India has established cleantech and green energy as the basic pillars for the infrastructure roadmap under PM GatiShakti, with its clarion call for net carbon zero emissions by 2070. The Prime Minister's GatiShakti programme has become the overarching umbrella for all infrastructure augmentation measures aimed at improving multimodal connectivity and logistical efficiency across the country. PM GatiShakti is making a strong push to improve logistics and supply chain efficiency, lowering logistics costs for all stakeholders. The seven engines of change that make up the National Infrastructure Pipeline are roads, railroads, airports, ports, mass transportation, waterways, and logistics infrastructure. Furthermore, the construction of a Unified Logistics Interface Platform will allow for cost savings in logistics.
New spending announcements were also made for the development of Tier II and III cities, including reform of existing building codes and the establishment of transit-oriented corridors with the goal of increasing urban capacity. This will be aided by interest-free loans to state governments for the same reasons, which will emphasize sustainability.
The government's decision to issue sovereign green bonds to fund green infrastructure development demonstrates the country's commitment to leading the fight against climate change. Support for electric vehicle charging infrastructure, as well as a production-linked solar panel manufacturing programme, are both positive moves in the right direction.
Various legislative incentives have been included in the budget that is expected to boost the real estate industry. Land record digitalization, allocation of INR 48,000 crore under PM housing projects, construction of 8 million dwellings by FY 2023, and replacement of SEZ legislation are projected to act as real estate drivers. Furthermore, data centre infrastructure status, digital connectivity, and 5G spectrum allotment will all help to promote the sector.
The land record digitization programme will create an integrated land information management system that will allow for transparent and litigation-free land transfers across the country. This move is likely to give the warehouse and logistics industry a significant boost.
With 8 million beneficiaries, the PM housing initiative is likely to meet the 'Housing for All' goal. This will result in more affordable houses being built. Demand for real estate-related sectors is predicted to rise as a result of spending on various housing projects.
The designation of data centres as infrastructure is intended to open up access to lower-cost, longer-term institutional financing, boosting investment in the sector. The capacity of the data centre sector is predicted to double from 499 megawatts in H1 2021 to 1008 megawatts in 2023. The expansion of the optical fibre network and the distribution of the 5G spectrum will result in a greater digital push, which will enhance real estate demand.
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