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Last Updated : May 28, 2020 03:42 PM IST | Source: Moneycontrol.com

Modi 2.0: Shorn of investments, infrastructure sector at a crossroads

According to government data, nearly 61 percent of the ongoing projects are delayed. Also, due to the COVID-19 crisis, investment in infrastructure could be further affected.


When Prime Minister Narendra Modi began his second tenure in May 2019, he placed emphasis on achieving the ambitious target of turning India into a $5 trillion economy by 2024.


With the target of $5 trillion economy in mind, Modi 2.0 set up a task force which led to the formation of the National Infrastructure Pipeline (NIP).

India needs to spend about $1.4 trillion (Rs 100 lakh crore) over these years on infrastructure, NIP said in a report.

"Sectors such as energy, roads and railways would amount to around 70 percent of the projected capital expenditure in infrastructure in India," the report said.

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However, the Economic Survey 2019-20 states the growth of infrastructure/ construction goods declined by 2.7 per cent in the financial year 2019-20 (April-November).

As investments slowed down during 2019-20, pace of road construction took a hit. The Ministry of Road Transport and Highways said only 8,784 km of highways were constructed between April 2019 and February 2020, far from the target of 11,000 km for the year 2019-20.

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"The lockdown has adversely affected movement of labour, construction equipment,trained operators and specialised service technicians," said PC Grover, Directorate General, National Highway Builders Federation (NHBF).

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According to government data, nearly 61 percent of the ongoing projects are delayed. Also, due to the COVID-19 crisis, investment in infrastructure could be further affected.

"One of the immediate priorities is to ramp up the level of private investment playing in the infrastructure space from the present low levels of around 20 per cent. The government needs to undertake policy and regulatory reforms to ensure a fairer allocation of risks and rewards between public and private investments in infrastructure projects," said Elias George, Partner and National Head - Infrastructure, Government and Healthcare, KPMG in India.


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The government has announced a clear intent to improve the policy and regulatory architecture for ensuring more viable and sustainable PPPs in the infrastructure sector. However, land acquisition and other costs remain high, leading to higher debt.

The total debt of the National Highways Authority of India (NHAI) went up by nearly 9.5 times to Rs 2,28,252 crore in February 2020, from Rs 24,188 crore as on March 31, 2015. There are concerns that debt repayment, pay-out money involved in arbitration, higher levels of construction and cost thereon might aggravate the situation.

The infrastructure industry's major expectation is the strengthening of the NBFC architecture since they are a key source of funding for infra play in India, according to George from KPMG.

It is also expected that government will focus on flagship sectors like renewable energy transition, urban mobility, the distressed aviation space and other  key sectors.

Read our complete coverage of Modi 2.0 first anniversary here
First Published on May 28, 2020 03:29 pm
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