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Infrastructure Sector in India

December, 2014


A key driver of the economy, Infrastructure is highly responsible for propelling India’s overall development. The industry enjoys intense focus from the top officials of the Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. This sector includes power, bridges, dams, roads and urban infrastructure development.

Market Size

The Indian Railways generated total approximate earnings on originating basis of Rs 73,403.67 crore (US$ 11.56 billion) during April 1, 2014 to September 30, 2014 as against Rs 65,525.85 crore (US$ 10.32 billion) during the corresponding period last year, registering an increase of 12.02 per cent. While the total goods earnings increased by 10.44 per cent, total passenger revenue earnings shot up by 16.46 per cent.

Meanwhile, the number of export and import containers moving through major ports in India expanded 7.34 percent year-over-year from April to October 2014, as a result of the Modi Government’s efforts to make port development a major priority.

Foreign direct investment (FDI) received in construction development sector from April 2000 to September 2014 stood at US$ 23,874.10 million, according to the Department of Industrial Policy and Promotion (DIPP).

Recent Developments

Some key investments and developments in the India’s infrastructure sector in the past few months are as follows:

Seven roads in Haryana will be developed as National Highways, stated a Government official. These roads are Ghaziabad-Noida-Faridabad-Sohna (75km), Nuh-Mandkola-Palwal-Jewar-Bulandshahar (60km), Sohna- Ballabhgarh-Tigaon-Gautambudh Nagar-Deota-Sikandrabad (85km), Palwal-Aligarh (83km) and Hodal-Bhiruki-Hasanpur- Kashipur-Kushak-Barauli-Ghori-Dadota-Mohna-Arwa-Chandpur-Manjh awali (65km).

Meanwhile, Railway minister Suresh Prabhu has suggested some path breaking ideas to revive Indian Railways Department. Some of the suggested measures include decentralisation of authority from the Railway Board to the zones and incentivising GMs for timely completion of projects. He also endorsed foreign investment for the sector, especially from Japan, which is already funding the Dedicated Freight Corridor (DGC) project of the railways.

The highways ministry has also decided to revive 34 projects worth more than Rs 26,000 crore (US$ 4.09 billion). Spanning over 4,084 km, the road projects would be restructured or converted from public-private partnership to engineering, procurement and construction (EPC) mode to get them going.

Recently, Singapore has expressed keen interest to partner with India for the development of 100 new smart cities in the country including a new capital for the state of Andhra Pradesh. The concerned authorities from both the sides have decided to further examine the areas of cooperation in building 100 new smart cities in India, developing infrastructure for 500 towns and cities, development of heritage cities and urban housing programme.

Government Initiatives

The Indian Government is taking every possible initiative to boost the infrastructure sector. Some of the steps taken in the recent past are being discussed hereafter.

Recently, the Government has relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and liberalised the exit norms. The Cabinet has also approved the proposal to amend the FDI policy.

India and the US have signed a memorandum of understanding (MoU) in order to establish Infrastructure Collaboration Platform. The document showcases the relationship between both the Governments which intend to facilitate US industry participation in Indian infrastructure projects to improve the bilateral commercial relationship and benefit both the Participants' economies. The MoU’s scope envisages efforts in the areas of Urban Development, Commerce and Industry, Railways, Road Transport and Highways, Micro Small and Medium Enterprises, Power, New & Renewable Energy, Information and Broadcasting, Communications & Information Technology, Water Resources, River Development and Ganga Rejuvenation.

Road Ahead

Indian port sector is poised to mark great progress in the years to come. It is forecasted that by the end of 2017 port traffic will amount to 943.06 MT for India’s major ports and 815.20 MT for its minor ports.

Along with that, Indian aviation market is expected to become the third largest across the globe by 2020, according to industry estimates. The sector is projected to handle 336 million domestic and 85 million international passengers with projected investment to the tune of US$ 120 billion. Indian Aviation Industry that currently accounts for 1.5 per cent of the gross domestic product (GDP), has been instrumental in the overall economic development of the country. Given the huge gap between potential and current air travel penetration in India, the prospects and possibilities of growth of Indian aviation market are enormous.

Exchange Rate Used: INR 1 = US$ 0.0157 as on December 23, 2014

References:Media Reports, Press Releases, Press Information Bureau, Department of Industrial Policy and promotion (DIPP).