The current infrastructure story in India is based almost entirely on government spending. It has allocated Rs 111 lakh crore ($1.4 trillion) under the National Infrastructure Pipeline (NIP) for FY2019-25. Sectors such as energy, roads, urban and railways form the bulk of this allocation. Around 71 per cent of the projected infrastructure investments in India is towards these sectors. In addition, some large programmes were announced or older ones expanded in Budget 2022. The capital expenditure outlay for 2022-23 has been increased sharply by about 35 per cent to Rs7.5 lakh crore from Rs 5.54 lakh crore. The target to expand the national highway network has been set at 25,000 km. Rs 48,000 crore has been directed towards the Pradhan Mantri Awas Yojana.
With so much being announced, it is understandable if investors think infrastructure is sector worth investing in, and infrastructure funds that fund houses offer seem a logical investment avenue. But take a closer look at these funds. In most cases, these funds are very broad based and tend to have overly diverse portfolios. They cover a wide range of sectors such as construction, engineering, telecom, transportation, power, cement, oil and gas, chemicals, IT services and more. Even generally, it is difficult to pin point which sectors come under infrastructure and which don’t.