Infrastructure Sector
Overview
One of the most significant economic sectors in India is the infrastructure industry. It comprises telephones, power plants, ports, airports, trains, and other crucial infrastructure. The industry is in charge of laying the groundwork for future economic expansion.
In recent years, the Indian government has made significant investments in infrastructure growth. The 1,900 projects on the National Infrastructure Pipeline (NIP), totalling 102 trillion won ($1.3 trillion), are expected to be finished by 2025. All significant infrastructure sectors, including ports, power plants, telecommunications, water supply, highways, trains, and airports, are represented in the NIP.
The infrastructure industry is now dealing with obstacles including slow project execution, a shortage of funding, and difficulties with land acquisition. The government is, nevertheless, making efforts to resolve these issues. The government is striving to expedite the land purchase process and has established a special purpose vehicle (SPV) to assist with project finance.
An essential component of the Indian economy is the infrastructure sector. It is necessary for the expansion and growth of the economy. Investments made by the government in infrastructure development will help the industry grow and add jobs. Additionally anticipated is international investment in the sector.
Recent News
By the end of 2024, India is on schedule to finish the fourth phase of the Mauritius metro project. Larsen & Toubro is carrying out the project, which is being funded by the Indian government. The fourth stage of the project will see the construction of four stations and a 12.3 km metro line.
6,003 km of highway improvements will be funded by NHAI in FY23: In the fiscal year 2022–2023, 6,003 km of highway projects have been funded by the National Highways Authority of India (NHAI). This is the most roadway project the NHAI has ever granted in a single fiscal year. In FY23, grants of 1.2 trillion yen ($15 billion) were granted.
India's road network has expanded by 59% during the past nine years: In the past nine years, India's road network has expanded by 59%. Currently, India's road network spans 5.34 million km. In the fiscal year 2023–2024, the government plans to build 60,000 km of new roads.
Key Facts
In India, one of the largest and fastest-growing economic sectors is the infrastructure industry.
The industry employs around 40 million people and contributes 9% of India's GDP.
By 2025, the government wants to have spent 102 trillion yen ($1.3 trillion) on infrastructure improvements.
The 1,900 projects on the National Infrastructure Pipeline (NIP), totalling 102 trillion won ($1.3 trillion), are expected to be finished by 2025.
From 2022 to 2027, the infrastructure industry is anticipated to expand at a compound annual growth rate (CAGR) of 8.2%.
Opportunities
vast and expanding market: With a population of more than 1.3 billion, India is a vast and expanding market. Because of this, there is a sizable market for infrastructure initiatives.
Government investment: The government is making significant investments in the construction of infrastructure. As a result, possibilities are being created for private sector involvement in infrastructure projects.
Demand for infrastructure services is rising as a result of factors including economic expansion, urbanisation, and industrialisation. This is giving the infrastructure industry new chances.
Technological progress: New and creative infrastructure solutions are being made possible by technological progress. This is giving the infrastructure industry new chances to boost sustainability and efficiency.
Challenges
Lack of funding: Because the infrastructure business requires a lot of cash, finance is scarce for infrastructure projects. This is a significant obstacle for the industry.
Issues with land purchase In India, acquiring land is a difficult and drawn-out procedure. Infrastructure projects may be delayed or even abandoned as a result.
Delays in project execution: Infrastructure projects frequently experience delays. This is because of several things, including bureaucratic red tape, corruption, and technical difficulties.
Inadequate skills: The infrastructure industry is in need of trained people. This is a significant problem for the industry since it may cause delays and cost overruns.
Analysis
|
Year |
Revenue (in INR crores) |
Revenue Growth (%) |
Operating Profit (in INR crores) |
|
2020-21 |
10,21,385 |
-4.90% |
1,89,829 |
|
2021-22 |
10,71,266 |
4.80% |
1,99,462 |
|
2022-23 (Estimated) |
11,25,000 |
5.10% |
2,10,000 |
Revenue Growth: The revenue for the fiscal year 2020–21 was INR 10,21,385 crores, although it grew at a negative rate of –4.90%. However, with a growth rate of 4.80% in 2021–22, the revenue rose to INR 10,71,266 crores. This suggests that the industry is recovering. The income is anticipated to increase by 5.10% to INR 11,25,000 crores in the predicted year 2022–2023.
Operating Profit: The operating profit for the fiscal year 2020–21 was INR 1,89,829 crores. It then grew positively, reaching INR 1,99,462 crores in 2021–22. The operational profit forecast for 2022–23 is INR 2,10,000 crores, which indicates further growth.
Future Prospects: The operational profit and revenue growth projections for 2022–2023 show a promising future for India's infrastructure industry. Numerous causes, including government expenditures in infrastructure development initiatives, greater private sector involvement, and the post-pandemic economic recovery, may be responsible for this surge.
From 2022 to 2027, the Indian infrastructure market is anticipated to expand at a CAGR of 8.2%, driven by rising demand and government spending. The industry is anticipated to draw international investment and serves as a significant employment and source of revenue for the government. Overall, the long-term outlook for the Indian infrastructure sector is positive. The sector is expected to grow at a healthy pace in the coming years, driven by government investment, increasing demand, and technological advancements.
ROSHAN PATEL
Disclaimer:
The following Report is intended for informational purposes only and should not be construed as financial advice or investment recommendations. It is important to conduct thorough research and consult with a qualified financial advisor or professional before making any investment decisions.