Budget, Mobility & The Great Economic Recovery

Aishwarya Raman Yash Narain Snehil Singh Feb 09, 2021

The Union Budget 2021-22 comes as a catalyst for steady economic growth in these unprecedented times. Anchored on India’s urgent need to become Atmanirbhar while catering to the world, it focuses on enhancing resilience and unlocking opportunities through innovation to foster prosperity.

The renewed thrust on the road and urban infrastructure, clean air, scrapping of old-polluting vehicles, and augmenting public transport, among others, reinforces the crucial role of mobility in spurring socio-economic growth. For, the budget’s inclusion of ‘Travelnomics’ catalyzes enhanced investments in mobility infrastructure to make cities accessible and connected; decarbonizes the transport sector by improving urban livability and making the country energy secure, and helps create millions of livelihood opportunities.

In continuity with last year, this budget is hinged on prioritizing better mobility and air quality (livability) outcomes for urban India. It provides for greater public spending and public-private partnerships in mass transit, generating an estimated cost savings of over INR 1,300 crores this year alone, thanks to decongestion, reduced travel time, fewer accidents, decreased emissions, and lowered operating-maintenance costs. Likewise, the outlay of INR 2,200 crores for clean air would curb pollution and help cities transition to shared and electric mobility on the back of hyperlocal, data-driven urban mobility governance.

Cities lie at the heart of India’s climate strategy, evident in the budget’s target of 30 cities having a comprehensive climate action plan within the next 12 months. This in itself would bolster India’s efforts at driving faster adoption and manufacture of electric vehicles (FAME), a policy central to the country’s decarbonization agenda. The outlay of INR 757 crores for FAME (~10% increase from last year) signals the focus of the government to incentivize over 41,500 electric two-wheelers, three-wheelers, cars, and buses.

However, these EVs would constitute only 0.1% of the new vehicle sales in FY 21-22. It is crucial to remind ourselves of the potential of EVs to make India fuel-efficient, besides reducing emissions and generating jobs. Even a 30% EV sales share by 2030 can help India save more than INR 1.1 lakh crore annually on crude oil imports. And while the budget’s provisions are a good start, the government must introduce a wide array of fiscal and non-fiscal initiatives to propel EV adoption. For example, GST subventions on EV batteries, charging and battery swapping services to reduce the upfront cost of the vehicle, dedicated pickup and drop off zones for EVs, fast-track approval and single-window clearance to register EVs and energy operations, subsidized electricity tariff, aggregation of open access electricity, etc. are a few ways to provide a much-needed fillip to the EV industry. Similarly, the voluntary scrapping policy too could be leveraged to give an impetus to the demand for energy-efficient vehicles and promote circular economy principles.

Further, the heightened manufacturing allocations for the auto and electronics sectors, advanced cells and batteries, etc. will catalyze India’s transition to a global e-mobility hub - localizing value chains that cater to the world. As one of the fastest job-creating industries in the world, e-mobility in India can generate over 1 crore direct jobs and up to 5 crore indirect livelihood opportunities in the coming decade, as estimated by the Ministry of Skill Development and Entrepreneurship. Budget 21-22 rightly stresses leveraging large-scale and phased manufacturing in such emerging areas, thereby providing economic opportunities, particularly for our youth, while creating and nurturing global champions of home-grown businesses.

Indeed, as structural, demographic, and technological shifts transform the nature of work in India's mobility sector, its survival and growth rest on skilling. Partnerships with countries such as the UAE and Japan, as detailed in the Budget, and emphasis on skilling and apprenticeship has the potential to further power India’s dynamic and labor-intensive MSME sector.

Last year, restricted movement on account of the pandemic forced the country to rethink and broaden its mobility objectives. Enhanced mobility is no longer just a facilitator for commute or freight but the very lifeline of the aspirational modern Indian city. Budget 2021-‘22 recognizes this. With infrastructure and inclusive development as two of its six pillars and the broader adoption of a Nation-first approach, the path for India’s clean, green and resilient mobility is charted for the decade but needs more to be actioned.