Stakeholders harp on the government's infrastructure push and expect construction orders of Rs.18 trillion in the next six years. This order inflow volume should support 12 to 15 per cent of industry-level execution of compound annual growth rate (CAGR).
Infrastructure sector, the most visible and inevitable opportunity, holding execution potential, political stability and reasonable inflation expectations, has seen good support in stocks. The sector is estimated to have risen to Rs 37 lakh crore, or 5.6 per cent of gross domestic product (GDP), between fiscals 2013 and 2017, marking a 56 per cent growth over the Rs 24 lakh crore spent in the preceding five years.
In fiscals 2016 and 2017, higher central government spending partially offset a steep decline in private investments and deterioration in state government finances. Five sectors û power, roads, telecom, irrigation and railways - accounted for approximately 83 per cent of all such investments in the past decade.
The government has consistently increased public expenditure on infrastructure in order to boost employment and provide renewed impetus to economic growth. The Government of India's (GoI's) total expenditure this year has crossed Rs 11.47 lakh crore (up to September 2017), out of the budgeted expenditure of Rs 21.46 lakh crore, showing an increase of Rs 1.2 lakh crore over last year.
The special thrust of this drive is on key development sectors, including rural roads, housing, railways, power, highways, ports, airports and digital infrastructure. The capex target of the GoI for 2017û18 is Rs 3.09 lakh crore, which is 31.28 per cent higher than last year, out of which Rs 1.46 lakh crore has been spent on capital works till September 2017. In addition, the government has fixed a capital expenditure target for central public sector enterprises (CPSEs) for 2017û18 at Rs 3.85 lakh crore, out which capex spending of Rs 1.37 lakh crore has been achieved till September 2017.
Vivek Sharma, Senior Director and Anand Madhavan Director, Infrastructure & Public Finance, CRISIL Infrastructure Advisory see the power, transport and urban sectors accounting for 78 per cent of the overall infrastructure spending. Outlays of such magnitude require expeditious resolution of the problem of stressed assets in banking, front-ending the creation of bankable projects, comprehensive restructuring of publicûprivate partnership (PPP) frameworks and deepening of the infrastructure financing ecosystem, which is of tremendous importance.
Stakeholders harp on the government's infrastructure push and expect construction orders of Rs 18 trillion in the next five or six years. This order inflow volume should support 12 to 15 per cent of industry-level execution of compounded annual growth rate (CAGR). Analysts expect ~Rs 7 trillion orders from Bharatmala and Rs 2 trillion orders from state governments and public works departments (PWDs) on roads and bridges. The urban transport and railways segment should be a Rs 3-trillion opportunity, given the thrust on metros for all towns with a population greater than 1 million.
With initiatives like 'Housing for All' and 'Smart Cities,' buildings and factories would easily emerge as a Rs 3-trillion opportunity. Airports, irrigation, water and escalations across the board would be another Rs 3-trillion opportunity. According to the NHAI website, IT expects 35 hybrid annuity model (HAM) and 34 engineering procurement construction (EPC) projects spanning 1,581 km and 994 km, worth Rs 360 billion and Rs 260 billion, to be bid out in the next six months.
Sectors to watch
Take the example of railways (turn to page no 81 to refer Railways: Looking at Major Infrastructure Enhancement).
A target of Rs 131,000 crore has been made for capex for the railways. Against this, an expenditure of Rs 50,762 crore has already been achieved. The main thrust is on upgrading the infrastructure to improve safety, laying of new lines and providing passenger amenities (turn to page no 84 to refer PPPs Get Rolling in Railways). LIC has provided Rs 1.5 trillion to railways and expects them to push programmes like electrification, track laying and station redevelopment, all in a significant manner.
Railway electrification of Rs 350 billion across 30,000 km is expected to be completed in the next four or five years. Railway electrification can save Rs 120 billion of fossil fuels. Currently, package sizes are smaller at 30û35 km, but are expected to increase to 300-500 km going ahead. IRCON, L&T, KEC, Kalpataru Transmission and Tata Projects, that takes the work and subcontracts it, are some of the major subcontractors in this space.
The following are the key among the capital works completed: