How to give India’s infrastructure sector a competitive edge

December 16, 2020 4:39 PM

Though the government expenditure is steering roads, major highways, and railways, humongous monies are needed for water and sewage, sanitation, logistics, and renewables, among other important sectors.

It's important that the government identifies the key programmes and ventures so that it can direct resources to only those, rather than spreading them all over multiple projects.

For any nation, its infrastructure is a matter of true pride. The infrastructure sector is the cornerstone of the Indian economy and has an important role to play in accelerating India’s overall development. The sector covers within its ambit sub-groups such as power, ports, roads, railways, telecommunication, and so on. To implement a massive infrastructure program, the Government of India launched the National Infrastructure Pipeline (NIP) in 2019, wherein it had planned to invest close to Rs 102 lakh crore on infrastructure projects by 2024-25.

Infrastructure is a key driver of the Indian economy and offers better prospects to strengthen India’s global competitiveness. In the next decade, India will require huge private investments and overseas funding in this particular sector as cities become highly connected, districts located within cities become accessible and the urban-rural interconnectedness improves. Thus, government’s policies need to be swiftly implemented for this purpose further.

How to Scale Up Infrastructure

The Covid-19 pandemic has posed some formidable challenges in front of the Indian government. Economic growth has touched a five-year low, bank credits are highly constrained, private investments have fallen to decadal lows, public-private partnerships in the infrastructure sector have yet to recover from the project failures and in all this, lines of fiscal strain are evidently deepening. Though the government expenditure is steering roads, major highways, and railways, humongous monies are needed for water and sewage, sanitation, logistics, and renewables, among other important sectors.

Here are a few steps that can help achieve the lofty goals and give infrastructural industry an edge:

1. Inject Private Investment

The completion of pending projects will take huge amounts of private investment. This can be achieved in two ways: firstly, reviving DBFOT or design, build, finance, operate and transfer mode of any project execution, and secondly, raising investment resources via aggressive asset monetisation. The former can be revived by rearranging the framework for risk allocation of various projects – with government taking over land acquisition and environmental risks entirely. Asset monetisation has gained immense traction of late, and can be spread to more central and state infrastructural entities to attract a new class of investors within the sector.

2. Overhaul the Credit Ecosystem

Traditionally, the infrastructure sector has heavily relied upon bank credit for meeting its debt and finance needs. However, recently, and especially owing to Covid-19, banks have developed cold feet with regard to financing various projects due to high asset liability mismatches and related execution risks. Therefore, in such a scenario, the government needs to either come up with a bond guarantee or enhance credit funds for the projects so that the bond market is rejuvenated to fulfil the financing requirements of the sector.

3. Harness Latest Technologies

It is quite surprising how majority large-scale construction projects in India do not employ cutting-edge project management software and tools even now, which are allowing other countries to finish their projects at a much quicker pace. Technologies such as augmented reality (AR), UAV and drones, 3D printing, Internet of Things (IoT) and Building Information Modelling (BIM) come in handy when fast-tracking construction projects. For instance, the 5D BIM assists project stakeholders to visualise an in-depth planned structure, much before a single brick is laid.

4. Streamline Priorities

It’s important that the government identifies the key programmes and ventures so that it can direct resources to only those, rather than spreading them all over multiple projects. For instance, creating Ministry of Jal Shakti, under which the government has committed to supplying piped drinking water to every household by 2024, and which will take over all other programmes connected to the management of water resources. This efficient approach will help redirect resources from multiple ministries to a singular, tangible, and achievable goal. Also, the government must identify large flagship projects, such as dedicated freight corridors, Navi Mumbai airport etc. and mark them as ‘National Importance Projects’. A separate dedicated project monitoring group can be formed to supervise their implementation.

Summing Up

As the economy is trying to trickle back to normalcy post the Covid-19 lockdown, current focus for key players in the infrastructure industry is to fast-track the already underway construction projects and start new work alongside. Though the projected growth rate and investments have been hampered in the short-term due to the pandemic, experts believe that the sector will pick up pace soon if the right measures are adopted by the government.

(By Prabh Paul, Co-founder & COO, Tracecost)

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