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Modi 2.0: Infrastructure expected to remain the government’s focus

July 2019
The availability of project funding has suffered since mid-2018.

Vishal Kotecha, Associate Director, India Ratings, agrees, saying, “There is a dire need to address the liquidity crunch, else project completion will be delayed and economic growth affected.”

Abhishek Gupta, Assistant Vice President-Corporate Ratings, ICRA, believes the construction sector will benefit significantly if long-pending claims are settled as that will provide immediate liquidity support.

It is believed that the focus on roads, urban infrastructure, railways and airports will continue. Among road projects, Samata Dhawade, Vice-President and Lead Economist, Aditya Birla, believes the focus will be on rural roads in the next two years. “Further, the Government’s drive on asset monetisation of road projects is likely to continue, which will enable implementation of new road projects.”

Meanwhile, Madan Sabnavis, Chief Economist, CARE Ratings, sees housing as an area that could merit some attention in forthcoming Budgets where households are given bigger tax breaks to invest in dwellings.

Infrastructure is expected to remain the focus of the Government.

“Infrastructure is a chronic deficit area,” says Abheek Barua, Chief Economist and Executive Vice-President, HDFC Bank. “One area builders can look at broadly in construction is the renewed emphasis on water and water availability, which would mean pipelines, river connectivity and small and large dam buildings to reduce monsoon dependency.”

The speed of road construction had become the benchmark for India’s infrastructure creation. Hence, Dhawade says, “If the Government is able to support this with appropriate policy and necessary clearances, cost overruns and delays can be reduced substantially.”

For his part, Sabnavis says the primary requirement is “acceleration in economic growth” as this spurs demand in the infra space. “The resolution of pending IBC cases will be paramount as a lot of interest in infra has been dissipated owing to these.”

All considered, the construction sector derives its orders from three key sectors: infrastructure, real estate, and industrial. The infrastructure sector has been highly dependent on public-sector spending in the past few years as private-sector participation has been limited to a few segments like roads.

However, public spending has increased over the years, which has supported infrastructure development, particularly in transport and urban infrastructure, according to Gupta. “The Government or public-sector capex in these segments is likely to grow further over the next five years as infrastructure creation and upgradation remains a key focus area.” Overall, he sees the key infrastructure segments contributing to Rs 15-18 trillion of orders to the construction sector over the next five years. Plus, construction players focused on affordable housing will see healthy order inflows.

SHRIYAL SETHUMADHAVAN