Infrastructure
The Indian construction equipment industry's revenues are estimated to reach US$ 22.7 billion by 2020.

Infrastructure Sector in India

Latest update: March, 2015

Total no of units of construction equipment sold in India

Equipment sales are estimated to expand at a CAGR of 9.7 per cent to 82,000 units during FY06-16.

Total no of units of construction equipment sold in India

FDI inflows in earth moving equipment

Cumulative FDI inflow (since April 2000) into earth-moving equipment increased at a CAGR of 12.2 per cent to reach US$ 209.3 million in March 2014.

FDI inflows in earth moving equipment

Infrastructure spending as per cent of GDP

The Planning Commission of India estimates total infrastructure spending to be about of 10 per cent of GDP during the 12th Five-Year Plan.

Infrastructure spending as per cent of GDP

Rising private investments for infrastructure development in India

During the 12th Five-Year Plan, the Planning Commission targets to achieve 47 per cent of total infrastructure investments through private funding.

Rising private investments for infrastructure development in India

Updated: March, 2015

CONSTRUCTION EQUIPMENTS SECTOR REPORT | March, 2015

Introduction

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 power sector has an investment potential of US$ 250 billion in the next 4-5 years, providing immense opportunities in power generation, distribution, transmission and equipment, according to Mr Piyush Goyal, Union minister of coal, power and renewable energy.

The total approximate earnings of Indian Railways on originating basis during April 1, 2014 to December 31, 2014 were Rs 114,656.13 crore (US$ 18.42 billion) compared to Rs 101,856.45 crore (US$ 16.37 billion) during the same period last year, registering an increase of 12.57 per cent.

The total approximate earnings from goods during 1st April 2014 – 31st December 2014 were Rs 77,161.55 crore (US$ 12.4 billion) compared to Rs 68,776.35 crore (US$ 11.05 billion) during the same period last year, registering an increase of 12.19 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 January 2015 stood at US$ 24,028.19 million, according to the Department of Industrial Policy and Promotion (DIPP).

Recent Developments

India is witnessing significant interest from international investors in the infrastructure space. Many Spanish companies are keen on collaborating with India on infrastructure, high speed trains, renewable energy and developing smart cities

  • The government has unveiled plans to invest US$ 137 billion in its decrepit rail network over the next five years, heralding Prime Minister Narendra Modi's aggressive approach to building infrastructure needed to unlock faster economic growth. Over the next year, India will increase investment by about a half to US$ 16.15 billion including funds raised by market borrowing.
  • Indostar Capital Finance Ltd and Reliance Capital Ltd have invested Rs 200 crore (US$ 32.15 million) in Alliance group, a real estate company. The consortium of institutions has invested in the holding company of Alliance group, Alliance Infrastructure Projects Pvt. Ltd.
  • Andhra Pradesh-based regional airline Air Costa will add eight aircrafts before 2016 to its existing four aircrafts. The airline, which reported an operating profit in the month of December, 2014 for the first time, said that it will be a pan-India player by the end of 2015
  • Union government-owned Kolkata Port Trust has signed an agreement with the West Bengal government to set up a new port at Sagar Island in South 24 Parganas district through a joint venture (JV) between the two. The Sagar Island port is estimated to cost Rs 11,900 crore (US$ 1.91 billion) and will be the first port to be built by the Union government in 14 years.
  • Larsen and Toubro Ltd (L&T) has announced that its building and factories business under L&T Construction has secured orders worth Rs 2,521 crore (US$ 405.27 million) in December 2014. In a statement, the firm said that these orders were from both the domestic and international markets.
  • Private equity funds and non-banking financial companies have found a niche within Gurgaon. Over the past 15 months, New Gurgaon, which is an area between Manesar and old Gurgaon, has seen investments in real estate projects by several private equity funds. Singapore sovereign wealth fund GIC recently put in Rs 150 crore (US$ 24.11 million) in a joint venture with realty firm Vatika group to develop two projects in this area of Gurgaon.

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.

The Reserve Bank of India (RBI) has notified 100 per cent foreign direct investment (FDI) under automatic route in the construction development sector. The new limit is effective 2 December 2014, RBI said in a notification on its website.

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$ 0.016 as on March 24, 2015

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

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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