In line with the objective, a revolution of sorts is taking place in the sector with enhanced investment for building more roads, ports, and railways. The newly adopted Vision 2047 document also lays emphasis entirely on infrastructure growth scaling up the pace of development of railways, roads, and ports surpassing most developed countries.

The government has taken the lead in strengthening the country’s infrastructure by proposing a record high ₹10 trillion capital spending in 2023-24 Union budget. And this spending is expected to continue for a few more years till the investment cycle is established where private and public spends complement to strengthen infrastructure.

India will spend ₹143 trillion on infrastructure between fiscals 2024 and 2030, more than twice the ₹67 trillion spent in the past seven financial years from 2017, according to Infrastructure Year Book 2023 released by ratings agency Crisil. Most of this investment is likely in sectors such as roads and power, while investment in nascent ones such as EVs, solar, wind, and hydrogen will pick up pace.

In 2023, infrastructure growth sped up after two years of relatively slower progress, particularly in the highways sector. The country has set the highest ever target of building 13,800 km of highways in FY24. India boasts of the world’s second-largest road network, with over 6.37 million km.

In recent years, there has been a substantial rise in the pace of construction of national highways, to an average of 29 km per day in 2021-22 from 12 km per day in 2014-15. The total length of highways has expanded to 145,155 km today from 97,830 km in 2014. Moreover, in the last nine years, more than 350,000 km of rural roads have been laid under the Pradhan Mantri Gram Sadak Yojana, giving all-weather road connectivity to villages.

The government’s budget support for road infrastructure has rapidly increased, reaching approximately ₹2.58 trillion in 2023-24. “Ministry has projected their demand for capex of more than ₹3 trillion for the year 2024-25 against Budgetary capital outlay of ₹2.58 trillion in 23-24,” the road transport and highways ministry said in response to a query from Mint.

Completion of strategic projects such as the Atal Tunnel, the Dhola-Sadiya Bridge, and the Chenab River Bridge, some of which had been pending for years, on a war footing is a testament to the government’s commitment to connectivity even in the remotest and most difficult terrains.

“As far as order inflows are concerned, the pipeline so far has been a bit slow. At the state level, there have been funding issues and, in some states, there have been elections, creating limitations resulting from model code of conduct creates. Even at central level, barring Ministry of railways, tender pipelines from Ministries like MoRTH-NHAI/ Ministry of Shipping has been slow. That said, on the construction side, despite slower pace of tenders, the orderbooks have remained strong within the industry. Partly this is good news as certain execution backlogs/carry forward from previous years will get delivered, and companies will have the breathing space to manage any sort of financial stress. Overall, a decent progress so far, and more importantly an opportune time for the industry to take stock and transform itself before the next wave of projects hits the market,” said Manish R Sharma, Partner and Leader, Capital Projects & Infrastructure, PwC India.

India’s railways have also undergone substantial modernization and expansion in the past few years. Capital expenditure on railway infrastructure has steadily increased over the past five years, with a capex of ₹2.4 trillion in FY24. Electrification of railway tracks has witnessed significant progress, reaching 37,011 route kilometres in the last nine years and is on verge completing the entire network in next few months. Further, on 4 March 2022, the successful trial of KAVACH, a state-of-the-art electronic system designed to help the Indian Railways achieve Zero Accidents was conducted. The introduction of the indigenously designed Vande Bharat Express, which are already functional in 25 routes, and its subsequent expansion showcases India’s commitment to high-speed rail travel. The ongoing construction of a high-speed line between Mumbai and Ahmedabad, with Japanese collaboration, and the development of new freight corridors will further boost connectivity, reduce travel time, and facilitate the efficient movement of goods and passengers.

“Moving ahead, there will be a spotlight on funding for infrastructure projects with emphasis on green sustainable infrastructure projects, considering the substantial amounts needed in both new and traditional sectors. The crucial factor lies in creating a variety of green financing tools like green bonds, sustainability-linked structures, and facilities for risk sharing or credit enhancement. There is a need for policy emphasis on broader adoption in this area, which has been a challenge in infrastructure financing and is even more crucial for green financing,” said Amit Kapur, Joint Managing Partner, JSA Advocates and Solicitors.

Apart from road and railways, governments move to bring down country’s high logistics cost from a level of 14% to below 10% levels is also seeing development of inland waterways as a system of moving goods around the country. The government’s focus on inland water transport has led to the declaration of 111 National Waterways. The cargo movement on these waterways reached a record high of 108.8 million tons in FY22, reflecting a growth of 30.1% compared to the previous year. The Inland Vessels Bill 2021 further facilitates the growth of inland water transport, creating a robust multi-modal transport ecosystem and fostering ease of doing business. Additionally, the Sagarmala Project aims to develop ports, streamline compliances, and reduce vessel turnaround time.

Another striking feature of infrastructure development in country is rapid progress made in the port sector. In FY-2022-23, a total of 177 projects were completed at Major Ports, while currently, 162 projects are at various stages of implementation with an investment exceeding ₹1 Lakh Crore. Currently, 800+ projects are worth more than Rs. 5.74+ lakh Crore are being monitored under the Sagarmala Programme, for implementation by 2035. Out of these, 237 projects worth Rs. 1.22 Lakh Crore have already completed, 262 projects worth Rs. 2.44 lakh Crore are under implementation and 310 projects worth Rs. 2.08 Lakh Crore are under various stages of development.

“There are two important parts to India’s infrastructure growth story – Funding and Financing. Private capital comes in financing, but to enable it, we need to sort out funding. And what funding means is to sort out the means to service the financing – and it is not just budgetary resources, it can be user charges too. As far as financing is concerned, it would sort itself out once funding is in place. Instruments like InvIT, ToT or asset backed securitisation are already there, and I strongly believe if we can create a strong ‘funding’ narrative, private capital will find its way into ‘financing’,” said Sharma adding that there is also a need internationalise Indian infrastructure firms so that have access to more sophisticated practices, that private capital finds more comfort in.

According to a recent report by American Investment Bank Morgan Stanley, India has transformed itself in less than a decade due to key policy choices like supply-side reforms, formalization of the economy, real estate regulation, digitizing social transfers, insolvency and bankruptcy reforms, flexible inflation targeting, focus on FDI, reforms in equity markets and government support for corporate profits among other measures.

The report suggests that in the coming decade, there is going to be a steady increase in many macroeconomic indicators of the Indian economy. India’s manufacturing capacity is expected to reach USD 1500 billion by 2032 as compared to USD 447 Billion in 2022; export market share to more than double to 4.5% by 2031 as compared to 2.2% in 2021; and India’s per capita income is expected to more than double from USD 2,200 currently to about USD 5,200 by 2032. The report concludes that India will emerge as a key driver of global growth with New India driving a fifth of the global growth through the end of the decade.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!

Published: 24 Dec 2023, 11:14 PM IST