As one of the most crucial sectors of the economy, the infrastructure and construction sector is vital for the country´s growing Gross Domestic Product (GDP) as well. In fact, today, core sectors such as power, minerals, defense, infrastructure, etc, along with logistics, construction, and oil and gas, present a lucrative opportunity for companies that are involved in construction and contracting. The Modi government at the Center is also trying its every bit to change the situation on the ground, so that real development in the economy takes place. Since May 2014, many initiatives have been taken including 100 per cent FDI under automatic route for the construction development sector. Also, the government has relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and has liberalised the exit norms. This has helped improve the sentiments in the construction and contracting segment, and despite the global slowdown, there has been movement on the ground and companies have started securing orders in sectors such as power, oil and gas, roads and highways, shipping and aviation.
Further, the manner in which the infrastructure sector moved during the last one decade can be gauged from the fact that the sector´s share in bank funding rose from 3.74 per cent in 2002 to about 10.40 per cent in 2015. Further, the total spending on infrastructure has been estimated to reach US$ 19 billion during the FY12-17 period. Importantly, the total infrastructure spending is expected to be about 10 per cent of the GDP during the Twelfth Five-Year Plan (2012-17), up from 7.6 per cent during the previous plan (2007û12). In this background, while on one hand, government and domestic construction and contracting players are building their capacities to cope up with the rising demand of infrastructure, international EPC contractors, on the other hand, are making beeline towards India.
Number-wise, as on March 2015, projects worth US$ 32.69 billion have been awarded through the PPP model and as many as 165 PPP projects are still under progress. As per an estimate, in the next five years, investment through PPP is expected to reach US$ 31 billion.
While the government seems totally focused on developing the country´s infrastructure, huge investment is expected to come in various fields and the scenario has started looking positive. Specifically, the power sector will be one of the major segments for construction and contracting companies, with US$ 250 billon expected to come in, in the next four to five years, further offering immense opportunities in power generation, distribution, transmission and equipment. Railways will be another major area where a huge amount of activity will happen in the next 10 years. Ports development will also witness lucrative activity for private players as the government seems to be quite focused in its approach. Looking at all these activities, the construction and contracting segment looks promising for related companies and the sector looks all set to change India´s destiny.