India has the second largest road network in the world with a total length of 4.1 million kilometers. Roads in India bear about 90 per cent of the country's passenger traffic and 65 per cent of freight traffic. The value of total roads and bridges infrastructure in India is expected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY12-17 to reach US$ 19 billion.
The key factors responsible for driving demand in the sector are rise in two-wheeler and four-wheeler vehicles and increasing freight traffic. During FY07-12, the CAGR in passenger car and commercial vehicle sales was 14.5 per cent and 17.9 per cent respectively. Rising per-capita incomes and a growing middle class have led to a higher number of car owners.
The Government of India has targeted US$ 1 trillion worth of spending on infrastructure during FY13-17. To promote the sector, the government has allowed 100 per cent foreign direct investment (FDI) under the automatic route. 100 per cent tax exemption is also allowed to companies for five years and 30 per cent relief for the next five years in road projects.
Road projects contribute around 60 per cent of public-private-partnership (PPP) projects in the country. The future prospects for the sector remain bright as approximately 12,700 kilometres of projects are expected to be awarded by National Highways Authority of India (NHAI) over the next two years. Further, future national and state highway projects are estimated to create an opportunity of US$ 51 billion over the next five years.