With a US$ 61.92-billion- dollar impetus in the 2017-18 budget, infrastructure was among the government’s top priorities this year. Through increased government spending, policy changes, cross-country collaborations and investment in breakthrough technologies, infrastructural activities recorded a steady increase.
So, how did the Indian infrastructure sector fare this year?1
Infrastructure witnessed strong growth in India in 2016-17. Through increased government spending, policy changes, cross-country collaborations and investment in breakthrough technologies, infrastructural activities recorded a steady increase, particularly through the second half of 2016.
Having gained a US$ 61.92-billion-dollar impetus in the 2017-18 budget, infrastructure was among the government’s top priorities this year. The emergence of private sector as a key player in the sector is noteworthy, while FDIs registered a significant increase as well. Notably, Squared Capital and the UAE-based DP world will continue to invest and expand their bases in India. Conducive government policies have also been attracting global investors, such as China Harbor Engineering and Mizuho Financial Group. This increasing interest from private and global players is welcome information since, by 2022, India’s requirement for infrastructure investment is expected to be worth US$ 646 billion.
A total of 33 deals were made in FY16-17, raising US$ 3.49 billion dollars. Power, roads and renewables constituted a majority share of these deals. One example is project UDAY (Ujwal Discom Assurance Yojana), which targets the revival of the power sector. India also signed off major projects with Japan (bullet train; US$17 billion) and Malaysia (various; US$3.86 billion) this year.
Here are some of the infrastructure projects, updates and initiatives that made headlines in 2016-17, and will continue well into 2018.
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91 projects; US$ 8.7 billion expenditure
In October 2017, the government approved US$ 107.64 billion for road construction (83,677 km). This, most significantly, includes the ambitious Bharatmala projects, which received a US$ 83.25 billion push. A US$ 3.42 billion project involving the construction of five tunnels (Zojila, Vailoo, Z-Morah, Pir-Ki-Gali and Daranga) on avalanche-ridden zones also gained approval.
33 projects; US$ 3.83 billion
Revenues increased to US$ 24.60 billion in FY17, and new revenue-earning initiatives, such as the rail display network (RDN) and the auctioning of branding contracts on trains, will look to add to this compounded growth. For 2017-18, the total capital and development expenditure of the Indian Railways has been pegged at US$ 20.33 billion. Interestingly, railways is looking at a revenue expansion of US$ 44.50 billion in FY20.
73; US$ 16.63 billion
Power generation stood at 329.3 GW by September 2017, recording a CAGR of 10.57% to date. Over the next 10 years, the sector will offer opportunities of US$ 300 billion to investors.
Affordable housing gained “infrastructure status” this year. The government steadied its interest in the sector through several projects, such as “Housing for all” and “Smart cities mission”, and by initiatives like the refinancing of individual housing loans.
The overall performance index of India’s eight core infrastructure industries grew by 4.8% this year. These included: electricity (10%), steel (9%), refinery (8.9%), cement (5.8%), and fertilizers (3.3%).
The infrastructure-related activities that registered the highest growth included export cargo (10 per cent), highway construction/widening (9.8 per cent), power generation (6.6 per cent), import cargo (5.8 per cent) and cargo at major ports (5.3 per cent).
What to look out for in 2018:
- The government has identified about 2,000 kilometres of coastal connectivity roads for development.
- The AAI will push to make 250 airports functional in the next two years – for example, at Itanagar, Kohima and Gangtok. Tier-2 cities may witness increased airport operations and maintenance in the PPP mode. Non-metro projects could see increased spending, as part of the government’s plans to modernise and upgrade airports.
- A new highway operations division will look at modernising and upgrading highway infrastructure.
- Green transport is expected to receive a good share of attention as well, with the government planning to establish cycle tracks on major roadways, in an effort to promote eco-friendly vehicles.
- Railway lines of 3,500 kilometres will be commissioned in FY18
- High-speed optical-fiber-enabled connectivity will be made available in more than 150,000 panchayats, as part of a string of rural development projects.
- An additional 20,000 MW will be generated in Phase-II of Solar Park development, while in Phase-II of Strategic Crude Oil reserves, reserve capacity will be increased to 15.33 MT.
- India’s Northeast States will receive a US$ 6.98 billion infrastructure boost.
- India has more than US$7.7 billion worth of metro projects underway, and this figure is expected to rise. Meanwhile, monorail projects in Tier-I and Tier-II cities are expected to improve inter- and intra-city connectivity, thereby contributing to better business growth.
1To know more, download the IBEF presentation here: https://www.ibef.org/industry/infrastructure-presentation
Download the full 2017 Economic Survey PDF here: http://indiabudget.nic.in/es2016-17/echapter.pdf
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