Indian Infrastructure- Industry Analysis

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.

In October 2021, the combined index of eight core industries stood at 133.5.

In March 2021, the combined index of eight core industries stood at 122.5. In the road’s sector, the Government’s policy to increase private sector participation has proved to be a boon for the infrastructure industry as many private players are entering the business through the public-private partnership (PPP) model. India is expected to become the third-largest construction market globally by 2022. India plans to spend US$ 1.4 trillion on infrastructure projects through the National Infrastructure Pipeline (NIP), from 2019 to 2023, to ensure sustainable development in the country. Through the NIP, the government invested US$ 1.4 trillion in infrastructure development as of July 2021.

Prime Minister Mr. Narendra Modi announced a Rs. 100 lakh crore master plan for multi-modal connectivity in October 2021, with the goal of developing infrastructure to lower logistic costs and improve the economy.

As a part of the GatiShakti National Master Plan, the government is planning to launch geospatial digital platform to facilitate planning and monitoring of projects ranging from telecom networks, gas pipelines to road and railways.

In the Union Budget 2021, the government allocated Rs. 60,241 crore (US$ 8.28 billion) for road works and Rs. 57,350 crore (US$ 7.88 billion) for the National Highways. The government plans to construct 8,500-kms road by March 2022. Moreover, an additional 11,000 kms of National Highway corridors will be completed by March 2022. The government announced an outlay of Rs. 118,101 crore (US$ 16.20 billion) for the Ministry of Road Transport and Highways. Also, the government, under the Bharatmala Pariyojana, was awarded a project worth Rs. 5.35 lakh crore (US$ 73.37 billion) including construction of >13,000 kms of roads worth Rs. 3.3 lakh crore (US$ 45.26 billion). The Ministry of Road Transport & Highways announced that it achieved a milestone by constructing 13,298 kms of National Highways, with construction of 37 kms per day in FY21. In August 2021, the Ministry of Road Transport and Highways constructed national highways extending 3,335 kms compared with 3,322 kms in August 2020. By 2024, the Ministry of Road Transport and Highways wants to build 60,000 kms of world-class national highways at a rate of 40 kms each day. In May 2021, Minister for Road Transport & Highways and Micro, Small and Medium Enterprises, Mr. Nitin Gadkari stated that the government is giving utmost priority to infrastructure development and has set a target of road construction of worth Rs. 15 lakh crore (US$ 206 billion) in the next two years.

In September 2021, the Ministry of Road Transport and Highways constructed national highways extending 3,824 kms compared with 3,950 kms in September 2020.

In October 2021, the Dubai government and India, inked an agreement to develop infrastructure such as industrial parks, IT towers, multipurpose towers, logistics centres, a medical college and a specialised hospital in Jammu & Kashmir.

For FY21, Indian Railways has the highest-ever planned capex of Rs. 215,058 crore (US$ 29.52 billion). As per the Union Budget 2021, the Ministry of Railways has been allocated Rs. 110,055 crore (US$ 15.09 billion). In FY21, the Indian Railways recorded the highest loading in freight transportation of 1,232.63 million tonnes. With this, the freight revenue of Indian Railways increased to ~Rs. 1,17,386 crore (US$ 15.84 billion) in the same period, as against Rs. 1,13,897 crore (US$ 15.36 billion) in FY20. In FY22 (until June 2021), passenger earnings stood at Rs. 4,921.11 crore (US$ 662.86 million) and freight earnings stood at Rs. 33,241.75 crore (US$ 4.48 billion). The gross revenue stood at Rs. 39,655.25 crore (US$ 5.34 billion) in FY22 (until June 2021). In August 2021, freight earnings stood at Rs. 10,866.20 crore (US$ 1.45 billion) and freight loading was 110.55 million tonnes.

In the Union Budget 2021, Rs. 9,000 crore (US$ 1.24 billion) has been allocated to create and augment telecom infrastructure in the country. Also, the Budget 2021 allocated Rs. 42,824 crore (US$ 5.88 billion) for the energy sector. Through the budget, the government announced Rs. 305,984 crore (over five years) for a revamped, reforms-based and result-linked new power distribution sector scheme.

The Mega Investment Textiles Parks (MITRA) scheme was launched to establish world-class infrastructure in the textile sector and establish seven textile parks over three years. The government announced Rs. 305,984 crore (US$ 42 billion) over the next five years for a revamped, reforms-based and result-linked new power distribution sector scheme.

In September 2021, National Mineral Development Corporation Ltd. (NMDC) R&D Centre collaborated with CSIR-IMMT (Institute of Minerals and Materials Technology) to pursue combined research projects on iron ore mining technologies.

On September 29, 2021, NTPC Renewable Energy ltd (REL), a 100% subsidiary of NTPC ltd, signed its first green term loan agreement with Bank of India for Rs. 500 crore (US$ 67.28 million) at a competitive rate and a tenor of 15 years for its 470 MW solar projects in Rajasthan and 200 MW solar projects in Gujarat.

In August 2021, Union Minister of Road Transport Highways, Mr. Nitin Gadkari announced to launch 1,080-km (road construction) projects worth Rs. 25,370 crore (US$ 3.4 billion) in Gujarat under the Bharatmala Pariyojana—the ambitious road and highways project that aims to build highways from Maharashtra, Gujarat, Rajasthan, Punjab, Haryana and then cover the entire string of Himalayan territories.

In August 2021, the Government of India, the Central Water Commission (CWC), government representatives from 10 participating states and the World Bank signed a US$ 250 million project to support the Indian government’s long-term dam safety programme and improve safety and performance of existing dams across various states. The Second Dam Rehabilitation and Improvement Project (DRIP-2) will strengthen dam safety by building dam safety guidelines, bring in global experience and introduce innovative technologies. The project will be implemented in ~120 dams across Chhattisgarh, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Odisha, Rajasthan and Tamil Nadu, and at the national level through the CWC.

The Ministry of Commerce's Logistics Division presented its plans for ‘Freight Smart Cities’ in July 2021, with goal of improving the efficiency of urban freight and lowering logistics expenses. Over the next 10 years, demand for urban freight is predicted to increase by 140%. Last-mile freight transit in Indian cities accounts for 50% of the total logistics expenditures in the country's increasing e-commerce supply chains. According to ICRA ratings, the domestic road logistics sector is predicted to grow by 6-9% in FY22.

According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the construction development sector (townships, housing, built up infrastructure and construction development projects) and construction (infrastructure) activities stood at US$ 26.14 billion and US$ 25.38 billion, respectively, between April 2000 and June 2021. In FY21, infrastructure activities accounted for 13% share of the total FDI inflows of US$ 81.72 billion.