India: An infrastructure opportunity

Infrastructure sector is a key driver for the Indian economy. The sector is often considered the backbone for propelling India’s overall development and enjoys intense focus from the Government of India for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Market experts agree that development of strong and future-ready infrastructure has the potential to unleash India’s true market potential for both global and domestic investors.

Market segments of the infrastructure sector like power, construction, bridges, dams and roads offer a strong investment opportunity for global developers. In fact, according to a recently released white paper from ASSOCHAM and CRISIL, India will require close to Rs 31 trillion (US$ 465 billion) for infrastructure development, around 70 per cent of which is expected to go into power, roads and urban infrastructure segment. “To provide uninterrupted power supply to homes and factories, and improve roads, telecom, transport and other urban infrastructure, the country would need an investment of more than Rs 6 lakh crore of every year or around Rs 1,700 crore every day from April 2015 to March 2020,” the white paper further said.

The paper also put the spotlight on financing of these capital intensive projects. The ideal mode for financing infrastructure projects will be for banks to focus on funding up to the pre-commissioning stage of projects, the white paper said adding that later, when the project has attained stability after commissioning, banks can look at refinancing the debt through bonds to long-term investors.

India has received foreign direct investment (FDI) worth US$ 24.09 billion in construction development sector alone from April 2000 to June 2015. The overall investment required by the Indian infrastructure sector directly translates into a very promising opportunity for infrastructure companies. In fact, with the government backing the sector and providing the required impetus, it is expected that an increasing number of global and domestic infrastructure companies will drive the infrastructure sector going forward.