We are not out of the woods yet. Eight core sectors - coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity - slowed to 1.1 per cent in July after a growth of 3 per cent in June, mainly on account of low expansion in coal output and contraction in steel, crude oil and natural gas production, all hinting at weakness in industrial recovery. AM Naik, chairman of engineering and construction conglomerate L&T, expressed his anguish publicly, and maintained that any recovery was at least a year away.
While Naik may be right, the roads sector has definitely rebounded, to about 13 km a day from just 3 km when the NDA took over, as per the ministry´s website. The government plans to sanction 20,000 km of projects in the coming three years and the target for the year to March 2016 has been set at 8,000 km. Seven top road builders have raised Rs 10,700 crore by way of bonds, paving the way for finance to the debt-stressed sector. Bonds come at a cost of 11 per cent and can be serviced, provided tolls commence within the timeline. Recent easing of policies, including allowing companies to exit projects and getting environmental clearances in time, have helped improve the climate.
Raising finance overseas has been the route many companies like ITNL have followed. The global scenario, though, is not too smooth with Caterpillar planning to cut up to 10,000 jobs by 2018 and JCB cutting 400 jobs in the UK. The Chinese residential property market, which contributes tremendously to the GDP, continues to remain under pressure. In the Middle East, too, the pressure on oil prices has rubbed off on public-sector spending, with the award of new construction projects having slowed down.
In the light of this global upheaval, India remains an attractive option. During Prime Minister Modi´s visit to the US, American CEOs implored him to step up the pace of reforms. Once he´s back, he will jump into the Bihar elections, but will have to sharpen his ability on seeing through bills of reform. For instance, the plan to build 50 non-frill regional airports has been revived. The logic to accelerate connection of the hinterland is unquestionable. However, roads take their own time and larger investment; a quicker way would be to deploy air taxis on economically run airports. Creation of these ´air corridors´ can accelerate economic growth.
Similarly Union Minister for Roads, Highways and Shipping Nitin Gadkari has been a strong proponent of the use of inland waterways and a bill is in the works. There is a proposal to offer 850 ports along major rivers to transport coal to the private sector. This will create new opportunities in logistics and is likely to bring in Rs 4,000 crore of private investments apart from saving sizeable freight costs. The smart cities mission, in which nearly two dozen countries are showing interest, also has great potential to revive the urban construction scenario. However, all this will require good footwork on the floor of Parliament.
Meanwhile, a flock of nimble-footed construction companies are emerging, who are moving stealthily and strengthening their order-books. Many of them are small and new. These and others who have retained their conservative approach are in the reckoning to grab the business as it is likely to unfold. Our 13th Construction World Annual Awards will celebrate these winners on October 16, in Mumbai. So while the third quarter gets underway along with the hopes of a better festive season, we will raise a toast to the fighters who managed to score on a rough turf.