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Infrastructure Sector in India
India is expected to become the third largest construction market globally by 2022.

Infrastructure Sector in India

Latest update: June, 2020

Last Updated: June, 2020

Indian Infrastructure Sector in India Industry Report  (Size: 731.54 KB ) (June, 2020)

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. India was ranked 44 out of 167 countries in World Bank's Logistics Performance Index (LPI) 2018. India ranked second in the 2019 Agility Emerging Markets Logistics Index.

Market Size

Foreign Direct Investment (FDI) in Construction Development sector (townships, housing, built up infrastructure and construction development projects) stood at US$ 25.66 billion during April 2000 to March 2020, according to Department for Promotion of Industry and Internal Trade (DPIIT). 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 requires 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 of the key investments made in the sector are listed below:

  • Large investment in infrastructure has seen momentum as overall PE (private equity)/VC (venture capital) investment touched an all-time high of US$ 14.5 billion in 2019.
  • The largest deal was done by Abu Dhabi Investment Authority, Public Sector Pension Investment Board and National Investment and Infrastructure Fund as they made investment worth US$ 1.1 billion in GVK Airport Holdings Ltd.
  • In FY20, the cumulative growth of eight core industries stood at 0.6 per cent.
  • As on 31 March, 26.02 million households got electricity connection under the Saubhagya Scheme.
  • In 2019, infrastructure sector witnessed seven merger and acquisition (M&A) deals worth US$ 1,461 million.

 

Government Initiatives

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

  • In April 2020, the Government set a target of constructing roads worth Rs 15 lakh crore (US$ 212.80 billion) in the next two years.
  • In May 2020, Border Roads Organisation (BRO) achieved major milestone by digging up a 440-metre long tunnel below the busy Chamba town on Rishikesh-Dharasu road Highway (NH 94).
  • Indian energy sector is expected to offer investment opportunities worth US$ 300 billion over the next 10 years.
  • NHAI will be able to generate revenue of Rs one lakh crore (US$ 14.31 billion) from toll and wayside amenities over the next five years.
  • In the Union Budget 2020-21, the Government has given a massive push to the infrastructure sector by allocating Rs 1,69,637 crore (US$ 24.27 billion) to develop the transport infrastructure.
  • mmunication sector has been allocated Rs 38,637.46 crore (US$ 5.36 billion) to develop post and telecommunications departments.
  • Indian Railways has received an allocation of Rs 72,216 crore (US$ 10.33 billion) under Union Budget 2020-21.

Achievements

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

  • In 2019, the sector witnessed seven merger and acquisition (M&A) deals worth US$ 1,461 million.
  • In March 2020, NHAI accomplished the highest ever highway construction of 3,979 km of national highways in FY20. 
  • Freight earnings in FY20 (till February 2020) stood at Rs 119,216.11 crore (US$ 17.06 billion), while its gross revenue stood at Rs 183,092.74 crore (US$ 26.20 billion) during the same period.
  • Cargo traffic handled stood at 707.4 million tonnes (MT) in FY20.
  • Electricity production in India reached 1,252.61 BU in FY20.
  • The largest PE investment witnessed was the acquisition of Pipeline Infrastructure India by Canadian asset management firm Brookfield’s for US$ 1.9 billion in Q12019.
  • India’s rank jumped to 22 in 2019 from 137 in 2014 on World Bank’s Ease of doing business - "Getting Electricity" ranking.
  • Energy deficit reduced to 0.7 per cent in FY20 from 4.2 per cent in FY14.

Road Ahead

The infrastructure sector has become the biggest focus area for the Government of India. India plans to spend US$ 1.4 trillion on infrastructure during 2019-23 to have a sustainable development of the country. The Government has suggested investment of Rs 5,000,000 crore (US$ 750 billion) for railways infrastructure between 2018-2030.

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

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123

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

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