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Navigating the Infrastructure Boom in India

Introduction

Construction industry in India stands as a testament to the nation's progress, reflecting upon the amalgamation of traditionalism and modernity. This blog explores multifaceted aspects of India's construction sector, unravelling its growth trajectory, challenges, and its pivotal role in shaping the country's economic future.

Construction Industry in India

The historical roots of construction in India, commences from the ancient architectural marvels to the colonial influences, highlighting the industry's evolution over the years. Post-Independence and the current millennium has propelled India as a major economy globally where infrastructure upheaval has played a central role.

Good infrastructure is the foothold of the country’s growth which plays a crucial role by influencing all major sectors of the economy, and hence the construction sector enjoys prime attention from the government in terms of policies and regulations to enable creation of world-class infrastructure.

Current Scenario

The Construction Industry in India comprises Commercial Construction, Residential Construction, Industrial Construction, Capital Infrastructure (power, bridges, dams, roads, etc.) and Urban infrastructure Development (Energy and Utility Projects). The Industry is expected to record a CAGR of 15.7% to reach $738.5 billion by 2022 and envisaged to reach $1.4 trillion by 2025, currently contributing a massive 55% share in the Steel Industry.

Growth Drivers

  • A. Government Initiatives - Government initiatives such as the PM Gati Shakti (Multi-modal Logistics development), Bharatmala Project (Road development), Sagarmala Project (Port-led development), Smart Cities Mission, AMRUT (Urban infrastructure), and Pradhan Mantri Awas Yojana, have provided a strong impetus for infrastructural growth in the country.
  • B. Private Sector Investment - To encourage Private-sector investments, the government is planning to introduce a credit guarantee facility to augment the credit perception of PPP (Public-private Partnership Projects) and enable access to long-term loans. Infrastructure Investment Trust helps private players with finance for large infrastructure projects through funds raised from retail and institutional investors without taking on debt, besides tax benefits.
  • C. Foreign Direct Investment – India’s FDI policy allows 100% FDI in various sectors, including residential and commercial properties, highways, hospitality, education, and industrial parks. To facilitate FDI, government is considering permitting LLPs (Limited Liability Partnerships) to finance townships, hotels, hospitals, and highways. This move aims to attract more foreign investors by reducing lock-in periods.

Technological Innovations

  • Technological transformations have revolutionized construction practices, from advanced material to cutting-edge technology, highlighting India's commitment to innovation. Under the Technology Sub-Mission of the PMAY-U, 54 global innovative construction technologies have been identified, marking a new era in the Indian construction technology sector.
  • Plethora of new technologies and construction methods have been introduced during the past decade. The use of Precast Construction and Modular Construction techniques are fast gaining preference, as they offer faster and more cost-effective alternative to traditional construction methods.
  • Introduction of the Building Information Management (BIM) technology has revolutionised the construction landscape optimizing project management and boosting efficiency.

Sustainability and Environment Preservation:

  • Given the energy challenges, sustainability shall emerge as a major trend in future constructions. The philosophy of sustainable constructions is to reduce environmental impact and harmoniously co-exist with surroundings, besides improving the quality of life of citizens.
  • A mandatory aspect of any construction project is to ensure preservation of the surrounding environment especially when it is tough to maintain soil erosion and degradation, in the country. Further, air and water pollution levels are at threatening limits. Companies are thus forced to adopt innovative measures and increasingly invest more in reducing the negative effect on the environment.

Impediments to Growth

Despite the growth and opportunities, the construction industry is also facing significant challenges.

  • Increased Material Costs: Raw materials are becoming more expensive. The primary cause is the scarcity in the sector’s material supply caused by a disrupted supply chain. The introduction of additional tax cess is driving up the price of raw materials. Adopting automation technologies can be a mitigating strategy.
  • Lack of Technology: Majority of small-scale building industry lacks efficient technology. Project planning is not done in a scientifically sound manner and proprietors of small businesses cannot afford the technology. Hence construction equipment makers should focus on designing and producing low-cost machinery that is accessible to small businesses.
  • Shortage of Skilled Labour: This issue has been plaguing the industry since quite some time. Majority of labourers reside in small towns that are often far from the project-site. Most of them don’t have school-level literacy who undertake all front-end tasks on the job site.
  • Lack of safety: Safety of the personnel are among top priorities, hence the government has created many safety protocols, making compliance of prescribed safety standards mandatory.
  • Time Limitations: Timely project delivery is associated with credibility of companies which is influenced by a number of factors, driving up cost in terms of manpower costs and investment. Further, lack of standardized regulations and quality control. This often leads to construction projects being delayed, over budget, or of poor quality.

Conclusion:

India needs to overcome deficiencies in its infrastructure and improve service quality in both urban and rural areas, so as to utilize the full potential of its growing economy in order to raise its contribution to the national GDP.

The Indian construction industry has significant growth potential, but faces several challenges. By focusing on innovation, standardization, and sustainable practices, the industry can mitigate the challenges and contribute to India's continued economic growth and development.

Hope this blog has aided you in getting insights on India’s Infrastructure Industry’’. Please note that this blog only provides information, prior to making any financial decisions, kindly conduct your own research. For more such insights kindly follow us on a weekly basis.