The stimulus package announced by the government on Sunday (See: Centre cuts excise by 4 per cent; unveils Rs30,700 crore stimulus) has several measure that will help increase spending on infrastructure.

One of the key measures announced has been to permit India Infrastructure Finance Company Ltd. to raise Rs10,000 crore through tax-free bonds by March 2009 as part of the exercise to support the Rs100,000-crore highways development programme.

Another measure that will help the industry across the board is the cut in CENVAT by 4 per cent.

Two major infrastructure sectors - cement and steel - have already announced that they would pass on the benefits of the excise cuts to the consumer. The reduction in CENVAT will bring down price of steel products by almost Rs1,000-1,600 tonne and that of a 50 kg cement bag by Rs8-10 at the retail level.

An additional Rs20,000 crore in the Plan expenditure would go towards such projects, which would require Parliament's clearance.

According to Montek Singh Ahluwalia, deputy chairman, Planning Comission,  the government aims to bring about financial closure in investments of Rs1 trillion over the next 18 months for road projects alone. These projects would be implemented over the next three years.

India's Rs314,152-crore road building programme is already getting bogged down for a variety of reasons, including litigation against bid guidelines and questions on the viability of the projects. Often the bid dates have had to be extended due to lack of bids.

Infrastructure companies have cited lack of funds as well as limiting regluations for their inability to participate in bids. Experts says that infrastructure spending has a cascading booster effect on the economy and in recessionary times, infrastructure spending can stimulate growth and produce jobs.

Better transport helps farmers to get their produce to cities faster, and companies to export their goods overseas.

The World Bank estimates that a 1 per cent increase in a country's infrastructure can lead to a 1 per cent increase in the level of GDP.