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 2016, India jumped 19 places in World Bank’s Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.
Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to March 2017 stood at US$ 24.3 billion, according to the Department of Industrial Policy and Promotion (DIPP).
India is witnessing significant interest from international investors in the infrastructure space. Some key investments in the sector are listed below.
- The Government of India has planned an investment worth Rs 45,000 crore (US$ 7.07 billion) for the development of India’s north-eastern regions bordering China, Bhutan, Bangladesh and Myanmar.
- The Ministry of Road Transport and Highways, Government of India, invested Rs 14,916 crore (US$ 2.32 billion) for the Special Accelerated Road Development Programme for North East (SARDP-NE) and Rs 4,095 crore (US$ 635.6 million) for the National Highway (Original) over the past two years to improve the road infrastructure in India’s north eastern region.
- The infrastructure sector in India witnessed 33 deals in FY 2016-17 involving US$ 3.49 billion as against US$ 2.98 billion raised across 31 deals in FY 2015-16, with the majority of deals led by the power, roads and renewable sectors, as per investment bank Equirus Capital.
- Meinhardt Group, an engineering company based in Singapore, plans to establish its position in India as it targets the next wave of India’s urban development to meet the country’s development needs.
- UAE-based firm, DP World, having previously invested US$ 1 billion in India, is planning to invest another US$ 1 billion in India’s infrastructure sector along with logistics and container terminals, stated Mr Sultan Ahmed bin Sulayem, Chief Executive Officer (CEO), DP World.
- I Squared Capital, a global infrastructure investment company, plans to raise up to US$ 4 billion through its second infrastructure fund, which will be invested in infrastructure assets in India and across the globe.
- Abertis Infraestructuras SA, a Spanish infrastructure firm, has agreed to buy two toll road assets in operation in South India from Macquarie Group for Rs 1,000 crore (US$ 151 million) to scale up its presence in India.
- GVK Power & Infrastructure Ltd won the bid to develop Mumbai’s second airport in Navi Mumbai for Rs 16,000 crore (US$ 2.39 billion).
- UAE-based Gamma Group, outlined plans of investing around Rs 3,000 crore (US$ 453 million) in the infrastructure, health and education sectors of Kerala.
- skyTran Inc., a NASA technology partner specialising in developing pod car systems for urban transport, plans to build a one-kilometre pilot track in India at its own cost as per the requirement of the government, which has shortlisted skyTran as one of the three companies chosen to build pod cars on trial basis.
- Infrastructure Leasing and Financial Services Ltd (IL&FS) and global private equity (PE) firm Lone Star plan to jointly invest US$ 550 million in stressed infrastructure projects in India.
The Road Transport & Highways Ministry has invested around Rs 3.17 trillion (US$ 47.7 billion), while the Shipping Ministry has invested around Rs 80,000 crores (US$ 12.0 billion) in the past two and a half years for building world class highways and shipping infrastructure in the country. The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport, prior to the general elections in 2019.
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.
- Contracts awarded under the Smart Cities Mission would show results by June 2018 as the work is already in full swing, according to Mr Hardeep Singh Puri, Minister of State (Independent Charge) for Housing and Urban Affairs, Government of India.
- The Government of India is working to ensure a good living habitat for the poor in the country and has launched new flagship urban missions like the Pradhan Mantri Awas Yojana (Urban), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and Swachh Bharat Mission (Urban) under the urban habitat model, according to Mr Hardeep Singh Puri, Minister of State (Independent Charge) for Housing
- The Government of India plans to facilitate partnerships between gram panchayats, private companies and other social organisations, to push for rural development under its ‘Mission Antyodaya’ and has already selected 50,000 panchayats across the country for the same.
- The Airports Authority of India (AAI) is planning to undertake new development works at Lucknow, Deoghar, Rajkot, and Allahabad airports to improve the airport infrastructure in the country and will also develop a Greenfield airport at Hirasar, Rajkot, according to the Ministry of Civil Aviation, Government of India.
- The Government of India plans to raise Rs 10 trillion (US$ 156.53 billion) for infrastructure projects from retirees and provident fund beneficiaries in tranches of Rs 10,000 crore (US$ 1.57 billion) by selling 10-year bonds at a coupon rate of 7.25-7.75 per cent.
- Airports Authority of India (AAI) is set to construct an Export Import Cargo Terminal (EICT) at Tulihal, Imphal airport, in the state of Manipur at an estimated cost of Rs 16.20 crore (US$ 2.54 million), which is expected to boost the export of handicrafts and perishable cargo from the state.
- The Cabinet Committee on Economic Affairs (CCEA) approved three railway connectivity projects at a cost of Rs 3,940 crore (US$ 614.96 million) in the states of Tamil Nadu and Kerala, which will speed up the operation of trains and also provide increased capacity for the future.
- The Asian Infrastructure Investment Bank (AIIB) has approved a loan worth US$ 329 million, which will be utilised towards construction of road linkages for last-mile connectivity to schools and tribal areas in 33 districts of Gujarat.
- In the Union Budget 2017-18, the Government of India has taken the following measures for the development of infrastructure.
- Increased total infrastructure outlay and defence capital expenditure by 10 per cent and 20.6 per cent to Rs 396,135 crore (US$ 59.18 billion) and Rs 86,488 crore (US$ 13.1 billion) respectively, over FY17 revised estimate.
- Railway expenditure allocation has increased by 8 per cent to Rs 131,000 crore (US$ 19.58 billion) for laying down 3,500 km of railway lines in 2017-18.
- Affordable housing has been given infrastructure status.
- Lock-in period for long-term capital gains on land and buildings has been reduced from three to two years.
- The Government of India launched a City Livability Index on June 23, 2017, which would measure the quality of life in 116 major cities on a set of 79 parameters.
- The Government of India has approved an investment of Rs 67,523 crore (US$ 10.49 billion) towards urban development in Maharashtra, thereby recording the highest investment outlay towards urban infrastructure in any state in three years.
- The National Highways Authority of India (NHAI) launched its first overseas issue of Masala Bond at the London Stock Exchange in May 2017, attracting bids worth over Rs 3,000 crore (US$ 465 million), with aim of raising capital for funding the infrastructure projects in India.
- The Union Cabinet, Government of India, has allowed state government agencies to borrow money from bilateral agencies in other countries to fund its infrastructure projects, in a bid to improve the funding options for infrastructure projects in the country.
- The Government of India plans to invest Rs 11,421 crore (US$ 1.77 billion) to improve basic urban infrastructure in 61 cities and towns of Uttar Pradesh, having population exceeding 100,000 each by 2019-20, under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme. The government has also approved investments in Tamil Nadu (Rs 11,237 crore or US$ 1.74 billion), Maharashtra (Rs 6,759 crore or US$ 1.05 billion), Haryana (Rs 2,544 crore or US$ 394.32 million), Chattisgarh (Rs 2,192 crore or US$ 339.76 milion), Manipur (Rs 180 crore or US$ 27.90 million) and Sikkim (Rs 39 crore or US$ 6.05 million) by 2019-20, under the same scheme.
- The Cabinet Committee on Economic Affairs (CCEA), Government of India, has approved the project to widen the Handia-Varanasi section of National Highway-2 in Uttar Pradesh, which would require an investment of Rs 2,147 crore (US$ 333.36 million).
- The Government of India has sought Parliament’s approval for an additional expenditure of Rs 59,978.29 crore (US$ 8.96 billion) for supporting the government’s rural jobs scheme, building rural infrastructure, urban development and farm insurance.
- The Ministry of Shipping plans to undertake development of 37 national waterways (NWs), out of the 111 NWs declared under the National Waterways Act 2016, in the next three years, which would have positive impact on reduction of overall logistics cost.
- The Government of India has laid out a roadmap to complete 23 Priority-I projects by 2016-17, 31 Priority-II projects by 2017-18 and balance 45 Priority-III projects by December 2019 under the Prime Minister Krishi Sinchayee Yojana (PMKSY) and Accelerated Irrigation Benefits Programme (AIBP).
- The Government of India plans to build 8,000 km of pavements and lay more cycle tracks in 106 cities in the next 5 years with an investment of Rs 80,000 crore (US$ 11.94 billion), in order to reduce carbon footprint in urban areas and promote activities like walking and cycling.
- The Central Electricity Authority (CEA) expects investment in India’s power transmission sector to reach Rs 2.6 lakh crore (US$ 38.85 billion) during the 13th plan (2017-22), and to enhance the transmission capacity of the inter-regional links by 45,700 megawatt (MW).
- The monetisation of 75 publicly funded highway projects of value Rs 35,600 crore (US$ 5.32 billion) via toll-operate-transfer (TOT) mode will fetch adequate funds to finance road construction of 2,700 km length of roads.*
- The Indian Railways plans to set up a US$ 5 billion Railways of India Development Fund (RIDF), which will serve as an institutional mechanism for the Railways to arrange funds from the market to finance various infrastructure projects.
- The Ministry Of Urban Development has approved investment of Rs 2,863 crore (US$ 433 million) in six states under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme, for improving basic urban infrastructure over FY 2017-20.
- Airports Authority of India (AAI) plans to increase its capital expenditure for 2017-18 by 25 per cent to Rs 2,500 crore (US$ 0.37 billion), primarily to expand capacity at 12 airports to accommodate increase air traffic, as per the Chairman of AAI.
- The Government of India and the Asian Development Bank (ADB) have signed US$ 375 million in loans and grants for developing 800 kilometer (km) Visakhapatnam-Chennai Industrial Corridor, which is the first phase of a planned 2,500 km East Coast Economic Corridor (ECEC).
India’s national highway network is expected to cover 50,000 kilometres by 2019, with around 20,000 km of works scheduled for completion in the next couple of years, according to the Ministry of Road Transport and Highways.
The Government of India is devising a plan to provide wifi facility to 550,000 villages by March 2019 for an estimated cost of Rs 3,700 crore (US$ 577.88 million), as per the Department of Telecommunications, Government of India.
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.
Sweden is interested in smart cities development in India and has put forward a Common Plan of Action for developing sustainable and environment-friendly public transport solutions and solid waste management for the smart cities under development.
The Ambassador of Japan to India, Mr Kenji Hiramatsu, has conveyed Government of Japan’s inclination to invest and offer any other feasible support for various ongoing as well as upcoming development and infrastructure projects in the North-Eastern region of India.