At a time when the overall economic growth is slowing, Finance Minister Nirmala Sitharaman's announcement of Rs 102 lakh crore worth of investment in infrastructure projects over the next five years, can be a trigger for boosting growth, says ICRA. According to the rating agency, the construction sector is likely to be a major beneficiary of this increased investment.
The finance minister on December 31 announced the infrastructure project pipeline for the next five years that will help the country nearly double the size of the GDP to $5 trillion by 2025.
"Creation of the national infrastructure pipeline in a short span of time is a positive step. The distribution of the infrastructure investment is in line with our expectations with a major allocation going towards transportation, energy and water segments. The front-loading of capex is also positive for construction sector," ICRA's Senior Vice-President and Group-Head, Corporate Ratings Shubham Jain said.
According to the sector-wise break-up of projects, Rs 24.54 lakh crore investment will flow in the energy sector, and of that Rs 11.7 lakh crore would be in just the power sector, while road projects will account for Rs 19.63 lakh crore while another Rs 13.68 lakh crore would be for railway projects.
Port projects would see spending of Rs 1 lakh crore and airports another Rs 1.43 lakh crore. Rs 16.29 lakh crore would be spent on urban infrastructure and Rs 3.2 lakh crore in telecom projects. Jain, however noted that while the target of scaling up investment in infrastructure is achievable, it would be filled with challenges.
"The Centre will require support from the state governments and the private sector to achieve this significant scale-up of investment as these two together have to undertake over 61 per cent of the investment," he said.
Further, reducing bottlenecks and resolving issues which have resulted in significant cost and time overruns will also be vital for efficient utilisation of the planned investment, Jain added.
Meanwhile, welcoming the move, Anshuman Magazine Chairman and CEO, India, South East Asia, Middle East and Africa of CBRE, said the move reinforces the government's commitment towards making India a leading world economy.
Naredco National President Niranjan Hiranandani said the move dovetails with other positive moves that the government has recently unveiled, and the positive effects should be visible sooner rather than later.
"The importance of infrastructure development in GDP growth has been apparent, the world over we have seen governments giving a push to infrastructure with the aim of giving a fillip to economic growth. India has been working towards the agenda of giving infrastructure development it's due especially in the scenario where the economy needs a fillip," he added.
Knight Frank India Chairman and MD Shishir Baijal opined that the announcement has re-enforced the government's commitment towards infrastructure growth providing the requisite clarity.
"Apart from the fact that a robust infrastructure is one of the key conditions to overall growth of the economy, this will create a stable base for India's economic recovery soon," he added.