Can India bite into the $ 680-billion EPC market?

The Government has recognised that the economy is suffering and needs a strong booster dose – placebos just won’t work. Today, all the ministers are brainstorming over revitalising the economy. For our part, CONSTRUCTION WORLD, along with Foundation of Infrastructure Research Studies Training (FIRST), took up the challenge and presented Union Minister of Commerce & Industry Suresh Prabhu with solutions to inject adrenaline into the economy. The overall intent is evident: bring in foreign exchange, enhance employment, contribute taxes and plan for long-term positive development for the country.

One of our solutions is to strategise to attract the ‘engineering research and design’ industry to India. This $ 680-billion industry is projected to move $ 170 billion – 25 per cent of total revenues – to Asia. Companies like Bechtel, AmecFoster & Wheeler, Black & Veatch and others are based in India, employing thousands of engineers creating engineering designs for complex multibillion infrastructure projects around the globe. This brings in foreign exchange, tax payments and employment. In fact, India has a talent pool of nearly 500,000 engineers graduating every year; such companies can help boost their skill sets and hone them as worthy assets for the country’s future technical talent pool. The stakes are high-$ 170 billion as mentioned above – and India should stake a claim. Back home, we have such skill sets in public-sector companies like Engineers India, RITES, IRCON, MECON, Engineering Projects, WAPCOS, and so on. Going forward, our EPC companies can create SPVs with such projects to forge future alliances as the home infrastructure market opens up to these global giants from the design and engineering space.

Our recent exercise in analysing India’s Fastest Growing Construction Companies has thrown up new names into the orbit that have grown geometrically over the past three years. These have shot to challenge the erstwhile fastest growing companies, indicating that new money has found its way to supporting companies that do not carry ‘legacy baggage’. Our jury comprising India’s top three rating companies debated the merits of excluding companies on grounds of questionable governance practices; therefore, some companies had to miss their spot of glory. This issue, bearing an element of surprise, we also present the nominees of this exercise. In our view, to be nominated is an important milestone in itself.

Early this year, CONSTRUCTION WORLD launched a new logo that intended to depict the increase in mechanisation, scale of infrastructure projects, project management expertise and adoption of technology. After scouring over the responses and suggestions received, we have conceded that our old logo stands tall with its leadership image well-entrenched in the minds of our readers and followers! Therefore, we have decided to bring it back amid the festivities of the month. On behalf of the entire team, I wish you all Happy Diwali and a prosperous new year!

Can the Budget bring the mojo back?

Demonetisation has dealt a body blow to the economy whether we like it or not. It has delayed the uptick in the economy by a minimum of several quarters. The informal economy is in tatters and the business outlook is glum.

But it is done and nothing can be done about it. Building a cashless economy is a long-term goal but given the fillip provided owing to the diktat, digital payments and the infrastructure required for their enablement are set to leapfrog.

The argument that the informal economy can become part of the formal economy by such legal leverage is flawed. On the contrary, when the fruits of development ripen under the formal economy, they beckon with sweet dividends. But this, too, is more likely to happen provided the formal economy offers infrastructure to enable ┬┤ease of doing business┬┤. Currently, the formal economy is low down in the rankings globally and has barely moved up a notch despite fervent campaigns trying to create a favourable pitch for the same.

The reason it is not being reflected is because the constituents, like the legal system for enforcing contracts, resolving insolvency, obtaining construction permits, are not tuned in to this level of efficiency. They need overhauling. The Insolvency and Bankruptcy Code 2016 has just got notified and has been activated in the last quarter. But why are we ranked 172nd in paying taxes? If we want more and more tax payers, the process should be made payer-friendly and easy to comprehend and observe. Disillusionment with the formal economy will always encourage new entrants to find easier, unlawful ways of avoiding taxes. Starting a business, too, is a difficult proposition. Then, how can we create and harness young talent, which is the true demographic dividend? Thus, only when the states make it easy to do business will the informal economy take lessons in joining the formal economy.

For instance, dealing with construction permits is a nightmare. State governments need to bring down the number of permits and arrive at a one-window solution. The Model Building Bylaws introduced earlier this year provide a framework for online approvals for building and construction projects in urban areas, including simplified environmental and other clearances within 30 days, and encourage self-declaration. Similarly, various states need to adopt the Real-Estate Regulation Act to make the shift. Here, the act has stiffened penalties for the developers, but has kept no onus of delay in permissions on the authorities, leaving the developer exposed to the mercy of the authorities.

Meanwhile, roads need to step up the acceleration. Up to November, the total length of road contracts awarded has been 5,688 km and the length of roads constructed 4,021 km, which is 12 km per day.

A huge development in the Northeast under NHIDCL is underway, covering a length of 8,007 km to be executed at about Rs 100,000 crore. And, in urban infrastructure, from January to December 2016, a total investment of Rs 272,380 crore has been approved for the smart city plans of 60 cities, AMRUT, PMAY (Urban), new metro projects, Swachh Bharat Mission (Urban), and redevelopment of seven Central Government residential colonies in New Delhi.

Public spending will need to further be stepped up to create employment opportunities for the informal sector. The Budget is expected to reduce taxes, offer incentives for using digital payments and announce major initiatives in public spending. The growth momentum had just about begun to accelerate when November 8 struck. Now, that mojo seems elusive. Can the Budget bring it back?

PS: The Union Budget is scheduled on 1st February, a big change in practice followed ever since we became independent. Construction World too is making a big change. Watch out for the February issue!