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LATEST NEWS

Overview

Infrastructure and Construction Sector Overview

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. The infrastructure sector has become a focus area of the Government of India. Under Union Budget 2018-19, US$ 92.22 billion was allocated to the sector. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In 2016, India jumped 19 places in World Bank's Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.

Increased impetus to develop infrastructure in the country is attracting both domestic and international players. Private sector is emerging as a key player across various infrastructure segments, ranging from roads and communications to power and airports. In order to boost the construction of buildings in the country, the Government of India has decided to come up with a single window clearance facility to accord speedy approval of construction projects.

Why India

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Asia will continue to dominate the global infrastructure market in the years ahead

China and India and other emerging Asian countries have been driving much of the growth in infrastructure spending.

India has a requirement of investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure by 2022 to have sustainable development in the country. India is witnessing significant interest from international investors in the infrastructure space. The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport.

The Government of India is taking every possible initiative to boost the infrastructure sector. Several steps have been taken in the recent past to improve investment in the infrastructure sector

Some key investments in the sector are listed below.

  • In February 2018, the Government of India signed a loan agreement worth US$ 345 million with the New Development Bank (NDB) for the Rajasthan Water Sector Restructuring Project for desert areas.
  • In January 2018, the National Investment and Infrastructure Fund (NIIF) partnered with UAE-based DP World to create a platform that will mobilise investments worth US$ 3 billion into ports, terminals, transportation, and logistics businesses in India.

Announcements in Union Budget 2018-19

  • Massive push to the infrastructure sector by allocating Rs 5.97 lakh crores (US$ 92.22 billion) for the sector.
  • Railways received the highest ever budgetary allocation of Rs 1.48 trillion (US$ 22.86 billion).
  • Rs 16,000 crore (US$2.47 billion) towards Sahaj Bijli Har Ghar Yojana (Saubhagya) scheme. The scheme aims to achieve universal household electrification in the country.
  • Rs 4,200 crore (US$ 648.75 billion) to increase capacity of Green Energy Corridor Project along with other wind and solar power projects.
  • Allocation of Rs 10,000 crore (US$ 1.55 billion) to boost telecom infrastructure.
  • The 90 smart cities shortlisted by the Government of India have proposed projects with investments of Rs 191,155 crore (US$ 30.02 billion) which include Projects Focusing on Revamping an Identified Area (Area Based Projects) with investment of Rs 152,500 crore (US$ 23.95 billion).
  • Contracts awarded under the Smart Cities Mission would show results by June 2018 as the work is already in full swing, according to Mr Hardeep Singh Puri, Minister of State (Independent Charge) for Housing and Urban Affairs, Government of India.
  • The Government of India is working to ensure a good living habitat for the poor in the country and has launched new flagship urban missions like the Pradhan Mantri Awas Yojana (Urban), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and Swachh Bharat Mission (Urban) under the urban habitat model, according to Mr Hardeep Singh Puri, Minister of State (Independent Charge) for Housing

India has 2nd Highest FDI Inflow in Construction

Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to December 2017 stood at US$ 24.67 billion, according to the Department of Industrial Policy and Promotion (DIPP). The logistics sector in India is expected to increase at a Compound Annual Growth Rate (CAGR) of 10.5 per cent, from US$ 160 billion in 2017 to US$ 215 billion by 2020.

1. USD 24.67 billion cumulative FDI inflows in construction activities till Dec 2017

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2. USD 12.36 billion cumulative FDI inflows in construction development sector till Dec 2017

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Employment Potential

The construction sector has accounted for more than a third of new jobs post liberalization, these figures are expected to increase in the near future.

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100% FDI has been permitted across various infrastructure sectors

  • Transportation: Roads, Railways, airports and ports
  • Affordable Housing: Target to build 5 crore homes over 5 years
  • 24x7 Power: USD 300 billion investment in the next 10 years
  • Urban Infra: Investment of USD 31,650 billion has been proposed by 99 cities under their Smart City plans

Government Focus Areas

  • Housing for All
  • Smart Cities Mission
  • Clean India
  • Clean Drinking Water
  • Rural Electrification

Road Ahead

Railways & Metro Rail

For 2018-19, the total capital expenditure of Railways will be USD 22.55 billion. As per Union Budget 2018-19, capacity constraints in the railways network will be eliminated through doubling of 18,000 km of tracks, third and fourth lines and conversion of 5,000 km of tracks into broad gauge.

A new Metro Rail Policy was approved in August 2017 mandating PPP* component in new projects.

Roads & Airport

Budget allocation for road sector increased to USD 10.07 billion in 2017-18 from USD 8.99 billion in 2016-17.

2,000 kilo meters of coastal connectivity roads have been identified for construction and development. Select airports in Tier 2 cities will be taken up for operation and maintenance in the PPP mode in the coming years.

Road projects worth USD 107.64 billion approved in October 2017

Housing
  • In 2017, government announced plans to facilitate higher investment in affordable housing.
  • “Housing for All” programs, launched in June 2015 aims to build 20 million urban homes and 30 million rural houses by 2022.
  • In March 2018, construction of additional 3,21,567 affordable houses was sanctioned
  • 60 million new homes are expected to be built in India between 2018 and 2024 
  • Highway projects worth USD 22.6 billion would be undertaken in north-east region of the country

Highway projects worth USD 22.6 billion would be undertaken in north-east region of the country

Metro Airports
  • The Airports Authority of India aims to bring 250 airports under operation across the country by 2020. The AAI has developed and upgraded over 23 metro airports in the last 5 years
  • AAI plans to develop city-side infrastructure at 13 regional airports across India, with help from private players for building of hotels, car parks and other facilities, and thereby boost its non-aeronautical revenues.

India’s national highway network is expected to cover 50,000 kilo meters by 2019, with around 20,000 km of works scheduled for completion in the next couple of years, according to the Ministry of Road Transport and Highways.

The Government of India is devising a plan to provide wifi facility to 550,000 villages by March 2019 for an estimated cost of Rs 3,700 crore (US$ 577.88 million), as per the Department of Telecommunications, Government of India.

India and Japan have joined hands for infrastructure development in India's north-eastern states and are also setting up an India-Japan Coordination Forum for Development of North East to undertake strategic infrastructure projects in the northeast.