Infrastructure and Construction Services
Infrastructure sector plays and important role in the growth and development of Indian economy. Nearly, 9% of India’s GDP is spent on Infrastructure services. It comprises of construction of power, bridges, dams, roads and urban infrastructure development which also forms as base and supporting factor for other services sectors. As infrastructure is highly responsible for propelling growth of other sectors and India’s overall development, Government of India is giving huge impetus for development of Infrastructure and construction services through focused policies such as open FDI norms, large budget allocation to Infrastructure sector, Smart cities mission, etc. India has become a large market for Infrastructure and Construction activities with the contribution of US $ 738.5 Billion in the FY2017 and is expected to become 3rd largest market in the world by 2025 (KPMG Infrastructure Report).
Infrastructure and construction sector has the 2nd largest share in in FDI inflows. Cumulative FDI inflows in the Construction Activities sector, which includes infrastructure, reached US$ 13.11 billion between April 2000 to June 2018 and in the Construction Development sector reached US$ 24.87 billion. Construction services exports has also increased from US $ 1004 million in 2012 to 2256 million in 2018. Infrastructure related activities witnessed strong growth during 2017- 18.
- National highway construction recorded the highest increase of 20 %.
- Freight traffic handled by Indian Railways increased 5.89 % Year-on-year during April-July 2018(P) to 396.86 million tonnes.
- Cargo handled by major Indian ports increased by 5.13 % during April-August 2018.
- Electricity generation in the country increased by 3.84% during April-July 2018.
India Infrastructure Market Revenues (US$ Billion)
Focused sectors under Infrastructure and Construction services
- Highway network in the country is expected to cover 50,000 km by 2019. All villages in India will be connected through a road network by 2019 under Pradhan Mantri Gram Sadak Yojana (PMGSY)
- Indian Real estate sector in India is expected to reach a market size of US$ 180 billion by 2020 and US$ 1 trillion by 2030. It is expected to contribute 13% of the country’s GDP by 2025.
- Services sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space driving growth of real estate services in the country.
- Installed capacity increased with CAGR of 9.1% in FY07–18 and stood at 344 GW for FY18.
- Indian energy sector is expected to offer investment opportunities worth US$ 300 billion over the next 10 years.
- According to Census of India, 50% India will get urban by Year 2050; as compared to around 31% currently.
- Initiatives such as Housing for all, Smart Cities, etc. are fuelling the growth the Urban Infrastructure and construction development.
- Housing for All by 2022, the government’s flagship scheme PMAY launched in June 2015 aims to build 20 million urban homes and 30 million rural houses by 2022.
- In March 2018, construction of additional 3, 21,567 affordable houses was sanctioned under PMAY.
References – Data and reports available in the public domain including Ministries Annual Reports and Data Statistics, IBEF Sectoral Reports, Department of Industrial Policy and Promotion (DIPP), RBI Handbook of Statistics on Indian Economy, Media & Industry Reports, Press Information Bureau (PIB), Union Budget 2018-19
Disclaimer – This information has been collected through secondary research and is available in the public domain. We are not responsible for any errors in the same.
Growth Drivers/Advantages for India
In recent years, India has emerged as one of the most attractive destinations for doing business and making investments. India ranks among the top 10 FDI destinations globally.
FDI inflows in the Construction Activities sector, which includes infrastructure, reached US$ 13.11 billion between April 2000 to June 2018 and in the Construction Development sector reached US$ 24.87 billion.
100% FDI is allowed in Infrastructure development projects such as townships, housing and built-up infrastructure and construction developments.
India is the fastest growing major economy in the world in 2018 and 2019. 6th largest economy in the world by nominal GDP and 3rd largest economy globally by PPP. With large share in world FDI inflows and Trade, demand of strong Infrastructure is essential.
Investment worth Rs 50 trillion (US$ 777.73 billion) is required in infrastructure by 2022 to have sustainable development in the country. Sectors like Ports Development, power transmission, roads & highways and renewable energy will drive the investments in the years to come.
Public Private Partnerships (PPP)
PPP in infrastructure space have increased and are expected to grow even further. Private equity and venture capital (PE/VC) investments in the infrastructure and real estate reached US$ 3.9 billion with 29 deals during the first half of 2018.Indian infrastructure sector witnessed 91 M&A deals worth US$ 5.4 billion in 2017.
Investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure is required by 2022 for country’s sustainable development.
The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport. High Budget allocations, Smart City Mission, Pradhan Mantri Awas Yojana, new metro rail policy, Housing for all, North East Special Infrastructure Development Scheme (NESIDS), etc. are some important initiatives taken by government which is driving the growth of India’s Infrastructure sector.
Improvement in Logistics
Indian logistics sector is growing 10% annually and is expected to reach US$ 215 billion in 2019-20. Rising Logistics services, increased demand of supporting Infrastructure such as Shipping Ports, Railways and Roadways connectivity.
In 2016, India jumped 19 places in World Bank’s Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.