Trade Analytics
Infrastructure Sector in India
India requires investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure by 2022.

Infrastructure Sector in India

Latest update: October, 2018

Growth

 

Last Updated: January, 2019

Introduction

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In 2018, India ranked 44th out of 167 countries in World Bank's Logistics Performance Index (LPI) 2018.

Market Size

Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to June 2018 stood at US$ 24.87 billion, according to the Department of Industrial Policy and Promotion (DIPP). The logistics sector in India is growing at a CAGR of 10.5 per cent annually and is expected to reach US$ 215 billion in 2020.

Investments

India has a requirement of investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure by 2022 to have sustainable development in the country. India is witnessing significant interest from international investors in the infrastructure space. Some key investments in the sector are listed below.

  • In June 2018, the Asian Infrastructure Investment Bank (AIIB) has announced US$ 200 million investment into the National Investment & Infrastructure Fund (NIIF).
  • Private equity and venture capital (PE/VC) investments in the infrastructure sector reached US$ 1,827 million during January-November 2018
  •  Indian infrastructure sector witnessed 91 M&A deals worth US$ 5.4 billion in 2017

Government Initiatives

The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport.

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

  • Announcements in Union Budget 2018-19:
    • Massive push to the infrastructure sector by allocating Rs 5.97 lakh crore (US$ 92.22 billion) for the sector.
    • Railways received the highest ever budgetary allocation of Rs 1.48 trillion (US$ 22.86 billion).
    • Rs 16,000 crore (US$2.47 billion) towards Sahaj Bijli Har Ghar Yojana (Saubhagya) scheme. The scheme aims to achieve universal household electrification in the country.
    • Rs 4,200 crore (US$ 648.75 billion) to increase capacity of Green Energy Corridor Project along with other wind and solar power projects.
    • Allocation of Rs 10,000 crore (US$ 1.55 billion) to boost telecom infrastructure.
  • A new committee to lay down standards for metro rail systems was approved in June 2018. As of August 2018, 22 metro rail projects are ongoing or are under construction.
  • Rs 2.05 lakh crore (US$ 31.81 billion) will be invested in the smart cities mission. All 100 cities have been selected as of June 2018.
  • The Government of India is working to ensure a good living habitat for the poor in the country and has launched new flagship urban mission, the Pradhan Mantri Awas Yojana (Urban). In May 2018, construction of additional 150,000 affordable houses was sanctioned under Pradhan Mantri Awas Yojana (PMAY), Urban.

Achievements

Following are the achievements of the government in the past four years:

  • The total national highways length increased to 122,434 kms in FY18 from 92,851 kms in FY14.
  • India’s rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing business - "Getting Electricity" ranking.
  • Energy deficit reduced to 0.7 per cent in FY18 from 4.2 per cent in FY14.
  • Number of airports has increased to 102 in 2018.

Road Ahead

India’s national highway network is expected to cover 50,000 kilometres by 2019. National highway construction in India has increased by 20 per cent year-on-year in 2017-18.

India and Japan have joined hands for infrastructure development in India's north-eastern states and are also setting up an India-Japan Coordination Forum for Development of North East to undertake strategic infrastructure projects in the northeast.

Exchange Rate Used: INR 1 = US$ 0.0155 as of March 30, 2018.

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

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