With an average of 7.7% in GVA in the last five years, the construction and infrastructure sector are fundamental in initiating economic recovery measures.
By Ashok Wani
The construction sector may hold the key to reviving the economy ravaged by the fallout from COVID-19. Though it suffered some setbacks, the construction industry on a more significant level has remained resilient amidst the barrage of economic disruptions.
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With an average of 7.7% in GVA in the last five years, the construction and infrastructure sector are fundamental in initiating economic recovery measures. Being the livelihood of more than 50 million people, it directly impacts various industries, stimulates demand, creates jobs, and revives the economy back to normalcy.
Infrastructure and Economic Growth –
Infrastructure is recognised as a prominent enabler of economic growth. It triggers a big multiplier effect, churning the development cycle through industries like steel, cement, technology, construction equipment, etc. This, in turn, increases employment and improves supply chain efficiency while developing robust public infrastructure. In order to nurse the economy back to health, the government of India has increased capital spending to 26%, with special emphasis on the infrastructure sector.
Balancing the Scales –
Focusing on large-scale construction initiatives will keep local businesses and workforces engaged. This can be facilitated by reviving the large projects halted due to lockdown restrictions. Construction projects can directly impact local businesses by hiring native workers to join the labour teams and obtaining raw materials from local sources. This provides more income for the employed firms to pass on to others around the area. Also, the local businesses in the particular locality can cater to the project needs better without tedious supply networks and logistics.
Focusing on Maintenance Infrastructure –
For quick recovery, it is highly beneficial for the government to focus on maintenance-based projects and backlogs. Maintenance projects are approved faster, hastens mobilisation of funds and rewards the communities in the area. Diverting attention to maintenance based projects in different locations will ensure infrastructure development and citizen growth on a grassroots level.
Accelerating Green Infrastructure –
Investments in green infrastructure can play a vital role in kickstarting economic recovery post-COVID-19. Construction firms can aid recovery by embracing green infrastructure. However, there must be an adoption of eco-friendly projects on the national level, influencing the transport sector towards adopting electrified transportation systems and promoting the restoration of the ecosystem.
Financing infrastructure development is one of the most challenging and critical issues, especially in the post-COVID scenario due to the scarcity of resources.
In the absence of a robust and deep bond market in India, many construction projects have so far been funded by commercial banks limiting the scope for long term PPP (Public Private Partnership) projects. Also, with the increasing NPA (Non-Performing Assets) accounts in the infra sector, the capital lending by the commercial banks for infra projects has been at an all-time low. The post covid world is expected to increase NPA further, restricting investments from commercial banks.
Technology the Juice to Infrastructure Growth –
Technology has become an absolute necessity in the pandemic. Not just it has ensured continuity, but it has laid a premise for the future of the workplace through profound technological enhancements. Large scale Engineering, Construction & Infrastructure enterprises (EC&O) have tasted the potential of technology in the form of IoT, ERP implementation and other on-premise and off-premise enhancements through innovation. Once these enterprise technologies are viewed as a necessity and adopted into the daily running of businesses, all post-covid projects will endure less time and cost for completion.
Other technological innovations for infrastructure like automation are reducing compliance work and managing efficiency, real-time resource analysis and planning. Dependence on technology in the new reality will prompt decision making processes and enhance project profitability.
Quick economic recovery is the ultimate priority today. This has underlined the urgency and importance of infra sector development and requires prominent actions with a clear intent and commitment to achieve sustainable economic growth.
(The author is Head – Technology & Innovation Highbar Technocrat Limited. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.