INFRASTRUCTURE SECTOR IN INDIA

1. 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.

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$
25.93 billion and US$ 23.99 billion, respectively, between April 2000 and December 2020.

Government Initiative and investment

In Union Budget 2021, the government has given a massive push to the infrastructure sector
by allocating Rs. 233,083 crore (US$ 32.02 billion) to enhance the transport infrastructure.
The government expanded the ‘National Infrastructure Pipeline (NIP)’ to 7,400 projects.
~217 projects worth Rs. 1.10 lakh crore (US$ 15.09 billion) were completed as of 2020. The
key highlights of the Budget 2021 are as follows:

 In March 2021, the Parliament passed a bill to set up the National Bank for Financing
Infrastructure and Development (NaBFID) to fund infrastructure projects in India.
 Indian railways received Rs. 1,10,055 crore (US$ 15.09 billion), of which Rs.
1,07,100 crore (US$ 14.69 billion) is for capital expenditure.
 Rs. 1,18,101 crore (US$ 16.20 billion) has been allocated towards road transport and
highway sector.
 In Budget 2021, the government announced the following interventions under
Pradhan Mantri Aatmanirbhar Swasth Bharat Yojana (PMANSY):
o An outlay of Rs. 64,180 crore (US$ 8.80 billion) over six years to strengthen
the existing ‘National Health Mission’ by developing capacities of primary,
secondary & tertiary care and healthcare systems & institutions to detect and
cure new and emerging diseases.
o This scheme will strengthen 17,000 rural and 11,000 urban health and
wellness centres.
o Setting up integrated public health labs in all districts and 3,382 block public
health units in 11 states.
o Establishing critical care hospital blocks in 602 districts and 12 central
institutions.
o Strengthening the NCDC (National Centre for Disease Control) to have five
regional branches and 20 metropolitan health surveillance units.
o Expanding integrated health information portal to all states/UTs.
o Rolling out the pneumococcal vaccine, a ‘Made in India’ product, across the
country.
o Rs. 35,000 crore (US$ 4.80 billion) has been allocated for COVID-19 vaccines
in FY22.
 The government announced Rs. 18,998 crore (US$ 2.61 billion) for metro projects.
 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.
2. RECENT TRENDS IN THE MARKET
The eight core infrastructure industries include coal, crude oil, natural gas, refinery
products, fertilisers, steel, cement and electricity. 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 from 2018-30.

2.1. Recent outlook

 In February 2021, Prime Minister Mr.Narendra Modi dedicated the LPG import terminal to
the country, a 348 km Dobhi Durgapur Natural Gas Pipeline section, which is part of the
Pradhan Mantri Urja Ganga project.
 In December 2020, 351-km ‘NewBhaupur-NewKhurja section’ in the Eastern Dedicated
Freight Corridor (EDFC), Uttar Pradesh was inaugurated.
 In December 2020, the Cabinet Committee on Economic Affairs (CCEA) approved three
infrastructure proposals worth Rs.7,725crore (US$1.06billion), to set up green field
industrial cities to enhance connectivity to major transportation corridors such as the
eastern and western dedicated freight corridors, expressways and national highways.
 Cargo traffic handled stood at 707.4 million tonnes (MT) in FY20.
 Electricity production in India reached 1,252.61 BU in FY20.

2.2. Roadways:

 INR 2.27 lakh crore has been allocated for highway projects of four poll bound states
 Gross Budgetary support has been increased by 17.6% in comparison to last year
 In fiscal 2021, there was a 12% increase in construction of highways. In total 7767km
national highway was laid.
2.3. Railways:

 INR 1.1 lakh crore was allotted to railways.

 100 percent electrification of broad-gauge rail tracks is expected by 2023.
 Eastern and western dedicated freight corridors will be commissioned by June
2022.
 Railways is leading India’s fight against climate challenge and is taking significant
steps towards meeting its ambitious goal of being a zero-carbon emissions
organisation by 2030 and meeting India’s Intended Nationally Determined
Contributions (INDC) targets.
 Indian Railways will require investment of Rs.35.3trillion (US$545.26billion) by
2032 for capacity addition and modernisation. The capital expenditure in the sector
is expected to increase by 92% annually.

2.4. Power and Energy:

 Budget 2021-22 has allocated a total amount of INR 3.06 lakh cr for discoms over
five years
 INR 61555 cr has been allocated for power sector, 21% higher than last year
 Framework to be put in place to let consumers choose from more than one
distribution providers, disrupting the monopoly enjoyed by current players
 Higher allocation for solar energy and renewable energy development by 28%(INR
760 cr)and 16%(INR 11000 cr) respectively compared to last year
 Increase in customs duty on imported solar inverters from 5% to 20%
 India's Power generation in Billion Units and growth rate (in %)
1,600.00 10

1,400.00 8

1,200.00 6

1,000.00 4

800.00 2

600.00 0

400.00 -2

200.00 -4

0.00 -6
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 *

Total Generation % growth

2.5 Oil and Gas:

 INR 14073 cr budgeted for petroleum products

 Pradhan Mantri Ujjwala Yojana to be extended to 1 crore more beneficiaries
 Gas pipeline project to be launched in Jammu & Kashmir
  Privatisation of Bharat Petroleum Corporation Ltd (BPCL) to be concluded in fiscal
2022
 City gas distribution network to be expanded to 100 additional districts over next 3
years
 Independent transport carrier to be set up for facilitating of natural gas pipeline

2.6 National Infrastructure Pipeline

 In the budget speech of 2019-2020, Finance Minister announced an outlay of Rs 100

lakh Crore for infrastructure projects over the next 5 years.
 Launched in Dec 2019 with 6385 projects, has expanded to 7400 projects.
 NIP is a first-of-its-kind initiative to provide world-class infrastructure across
the country and improve the quality of life for all citizens.
 It will improve project
A llo c ati o n o f N ati o n al in v est men t p ip elin e preparation, attract
(N IP )
investments (both
Railways domestic & foreign)
12% into infrastructure, and
Others will be crucial for
29% Urban attaining the target of
17% becoming a $5 trillion
economy by FY 2025.
 Covers both economic
and social
infrastructure projects
Road  Investment
Energy 18% needed:  ₹111 lakh
24% crore over the next five
years (2020-2025) to
build infrastructure
projects and drive economic growth.
 Energy, roads, railways and urban projects are estimated to account for the
bulk of projects (around 70%).
  The centre (39 percent) and state (40 percent) are expected to have an almost
equal share in implementing the projects, while the private sector has 21
percent share.

2.7 National Monetisation Plan

 In its approach of “government has no business, being in business”, the National
Monetisation Plan was introduced in the recent budget.
 The purpose is to monetise assets of some of the CPSE (Central Public Sector
Enterprises) assets that are underutilised or unutilised.
 The government has a target to monetise around 100 assets in oil, gas, ports, airports
and power sectors in the coming times providing an investment opportunities worth
INR 2.5 trillion for investment bankers, sovereign funds, pension funds as well as
domestic investors.
 The NHAI has planned to raise INR 1lakh crore over the next 5 years through the toll
operate transfer mode.

2.8 Development Financial Institutions (DFI)

 In the recent budget, the government stressing on the need for long-term debt
financing for key infrastructure projects decided to create a professionally managed
DFI to act as a provider, enabler and catalyst for infrastructure financing.
 The DFI which has been named as the National Bank for Financing Infrastructure
and Development focuses on higher capex spend on infra creation and has been set-
up with a corpus of INR 20000 crores.
 The aim is to have a lending portfolio of INR 5lakh crores under this DFI over the
next 3 years.
 Some of the famous banks that started as DFIs in the past include ICICI Bank, IDBI
Bank and SIDBI.

3. Key drivers for Infrastructure growth in India

 Government Initiatives
 Public Private Partnerships
 International Investments
 Housing Development
 Infrastructure Needs
4. SWOT analysis for Infrastructure Sector in India

4.1. Strengths of India’s Infrastructure Sector:

 Proliferating domestic and offshore infrastructure funds target the Indian

infrastructure market, driven by strong demand from the transport, power, urban
infrastructure and irrigation segments.
 India's government is keen to facilitate private sector participation in infrastructure.
 Application of takeout financing boosted in India, potentially unlocking around
INR300bn (US$6.2bn) in bank debts, which could be used to finance infrastructure
developments in India.

4.2. Weaknesses of India’s Infrastructure Sector:

 Lack of a structured regulatory and policy framework, or well-defined operating and

financing regulations - public-private partnership (PPP) framework and regulations
are inconsistent and lack transparency.
 The country is overly bureaucratic, thereby delaying the absorption of funds and
deterring investors.
 There are low levels of domestic expertise, stemming from a shortage of skilled
project managers and engineers.
 There is low mechanization and limited use of modern technological equipment.
 Limited long-term borrowing capability on the domestic banking sector due to an
immature bond market.

4.3. Opportunities of India’s Infrastructure Sector:

4.3.1. Government Initiatives

 India plans to spend US$ 1.4 trillion on infrastructure in the next five years
 For funding and development of infrastructure, government of India has decided to
rely on off-budget sources and Public Private Partnership (PPP).
 For creating an eco-system to make India a global hub for electronics manufacturing
a provision of US$115.62 million in 2017-18 in incentive schemes like M-SIPS and
EDF along with the recently announced PLI schemes.
 Introduction of National Steel Policy in 2017 to aim at higher spending on
infrastructure and construction through government initiatives which will further be
enhanced by DFIs, NIP and National Monetisation Plan.

4.3.2. International Associations

 In June 2018, the Asian Infrastructure Investment Bank (AIIB) has announced US$
200 million investments into the National Investment & Infrastructure Fund (NIIF).
  Japanese investment has played significant role in India’s growth story. Japan has
pledged investments of around US$35 billion for the period of 2014-19 to boost
India’s manufacturing and infrastructure sectors.
 The US government’s Overseas Private Investment Corporation (OPIC) is planning to
invest in India’s infrastructure, port and solar energy sectors.
4.3.3. Urban Indian Real Estate

 With every sixth urban person globally being an Indian, the real estate and
construction sector holds significant opportunity for both global and domestic
companies engaged across the value chain.
 India will need to construct 43,000 houses every day until 2022 to achieve the vision
of Housing for All by 2022.Hundreds of new cities need to be developed over the
next decade.
 This has the potential for catapulting India to 3rd largest construction market
globally.
 The sector is expected to contribute 15 per cent to the Indian economy by 2030
 The policy reforms such as the Real Estate Act, GST, REITs, steps to reduce approval
delays etc. are only going to strengthen the real estate and construction sectors as
well as push for PM Aawas Yojana along with other measures to create more
infrastructure.

4.4. Threats of India’s Infrastructure Sector:

 India may prove unable to cope with its burgeoning population, which has passed
the 1.2bn mark, posing a major threat to the economy and political situation.
 Destructive flooding affects productivity.
 Obstacles such as red tape, lack of transparency and bureaucratic complexities will
threaten implementation of government projects.
 Land clearance issues cause major delays to infrastructure and construction
projects.
 An inadequate system for compensation and environmental approvals is slowing
investments and, in some cases, preventing projects from progressing.
5. Government Initiatives

5.1 Affordable Housing

 In Union Budget 2021, the government announced Rs. 13,750 crore (US$ 1.89 billion)
to AMRUT and Smart Cities Mission
 In Union Budget 2021, the government announced INR 54,581crore (US$7.64billion)
to the Ministry of Housing and Urban Affairs.
 The Union Budget 2021 provided policy impetus to achieve the ‘Housing for All by
2022’ vision through various measures such as extension of tax relief for the
affordable housing segment.
 As per Union Budget 2021, the government announced a tax proposal for an
additional deduction of Rs. 1.5 lakh (US$ 2.06 thousand) shall be available for loans
taken up until March 31, 2022, for purchase of affordable house.

5.2 Logistics and Warehousing

 Logistics and warehousing play an important role in the industrial advancement of
the country. They are a fundamental part of business infrastructure and one of the
key enablers in the global supply chain.
 In 2020, the logistics sector in India is estimated at ~ US$ 215 billion.
 Investment in the logistics sector is expected to reach US$ 500billion annually by
2025. Warehousing in India is expected to get investment of INR50,000 crore
(US$7.12billion) by the end of 2021.
5.3 Airport Infrastructure
 The AAI has developed and upgraded over 23 metro airports in the last 5 years.
 AAI plans to develop city-side infrastructure at 13 regional airports across India, with
help from private players for building of hotels, car parks and other facilities.
 The development of Navi Mumbai airport has been approved. The project will be
developed on 74:26 percent partnership between MIAL and Cidco and airport’s
phase 1 with annual handling capacity of 10 million passengers each year rephrasing
it from the origin.
 The AAI plans to spend over Rs 21,000 crore (US$ 3.2 billion) between 2018-22 to
build new terminal and expand capacity of existing ones.
5.4 Metro and Mono Rail Infrastructure Investment
Metro rail projects worth over Rs 500 billion ($7.7 billion) are underway in India and this pile will
probably grow.

A new Metro Rail Policy was announced in August 2017, which will give boost to private investments
by mandating public private partnership (PPP) component in new projects. A new committee to lay
down standards for metro rail systems was approved in June 2018.10

Monorail has made its beginning in India with Mumbai being the first city in the country to have this
transport system in place.

Monorail Projects are being developed in Chennai, Pune, Thiruvananthapuram, Bengaluru, Thane,
Delhi, Port Blair, Dehradun, Chandigarh etc.

6. KEY INFRASTRUCTURE COMPANIES IN INDIA

6.1. Larsen & Toubro Infrastructure Development Projects Limited (L&T IDPL)
Larsen & Toubro is the leader among infrastructure companies in India. Larsen & Toubro
Infrastructure Development Projects Limited is a part of L & T Group. The company was
founded in Mumbai in 1938 by two Danish engineers, Henning Holck-Larsen and Soren
Kristian. Larsen & Tubro today is one of the largest construction companies in India, and
their project portfolio includes road constructions worth more than Rs 18,000 Crore. Some
major projects of the company are:
 Coimbatore Bypass
 Panipat Elevated Corridor
 Krishnagiri bypass in Krishnagiri, Tamil Nadu
 Gujarat Refinery for IOCL
 Fertilizer Plant for NFCL, Kakinada
6.2. Reliance Infrastructure Limited
Reliance Infrastructure Limited stands at second position. Reliance Infrastructure Company
is involved in many projects related to real estate, airports, roads and high ways etc. The
market capitalization of Reliance Infrastructure is Rs 11,098 Crore as on July 2015. This is
only for the distribution of electricity in suburbs of Mumbai. They are the winner of National
Award for Excellence in Energy Management. Some of the projects handled by the company
are:
 Coal based Thermal Power Station in Dahanu, Maharashtra
 Delhi Airport Express
 Nanded Airport in Maharashtra
6.3. GMR Infrastructure Limited
GMR Infrastructure limited is stands at 3rd position in the list of top 10 infrastructure
companies in India, the company has founded in 1996, it is involved in various projects like
energy, real estate, highways, and Airports etc., and its market capital stands at Rs 8,049
Crore as on July 2015 GMR handles many turnkey projects in Turkey, Maldives, Philippines,
Singapore and Indonesia apart from India. 2 major projects completed by this company are:
 Indira Gandhi International Airport, New Delhi
 Rajiv Gandhi International Airport, Hyderabad, Telangana
6.4. IRB Infrastructure Developers Limited
IRB Infrastructure Developers Limited was incorporated with an objective to finance IRB
Group. IRB is one of leading Infrastructure Development Company in Road construction
India. It has completed road projects about 9,000 kilometers and it has a market capital of
around Rs 7,940 Crores. The major projects completed by IRB are:
 Mumbai-Pune Expressway
 Ahmedabad-Vadodara Expressway
6.5. Hindustan Construction Company
Hindustan Construction Company was founded in 1926. HCC is Winner of Global
Sustainability Leadership Award. HCC stands among oldest infrastructure companies in the
country and it undertakes various projects like expressways, bridges, tunnels and power etc.
HCC market capital stands at Rs 1,905 as on July 2015, few major projects completed by HCC
are:
 Bandra Worli Sea link
 Mumbai-Pune Expressway
 Kudankulam Power Plant
6.6. GVK Power and Infrastructure Limited
GVK Infrastructure & Power limited is a public listed infrastructure company, founded in
1994. GVK is involved in various projects related to Power, Roads, Hospitality and Mining
etc. GVK has got several awards and recognitions. This company is associated with
numerous projects of excellent quality and is also known for its time bound delivery. Its
market capital stands at Rs 1,252 Crore as on July 2015. Few notable projects completed by
GVK are:
 Deoli-Kota Expressway
  Hydro Electric Project in Jammu and Kashmir
 Kempegowda International Airport, Bengaluru
6.7. Lanco Infratech Limited
Lanco Infratech Limited stands at 9th place among the top 10 infrastructure companies of
India, located and Headquartered New Delhi. LIL is mainly engaged in Road, Power and
Expressways construction projects. LIL market capital stands at Rs 1,137 Crore as on July
2015. Some of the notable projects undertaken by Lanco Infratech are:
 Devihalli Highways
 Udupi Power Corporation Ltd (UPCL) at Yellur in Udupi district.

New Investment in Indian Infrastructure

100
90
New Investment (US$Billion)

80
70
60
50
40
30
20
10
0
FY16 FY17 FY18 FY19 FY20

Roads Railways Power Distribution Power

Real Estate Manufacturing Mining