Sanjay Jayram, Executive Vice President – Sales & Marketing at JSW Steel, on Indian infrastructure growth
As part of a series of Q&As, constructsteel is interviewing experts within the construction sector on aspects of steel’s performance and sustainability in the built environment.
To achieve India’s ambitious goal of becoming a US$ 5 trillion economy by 2025, strong infrastructure growth is essential. Therefore, the infrastructure sector is getting the foremost focus and India is creating new and upgrading existing infrastructure. After the shockwaves of COVID-19, the economy is trying to come back to normalcy, and the focus is to fast-track the under-construction projects and start new work.
India’s infrastructure bottleneck is a primary constraint to improving its global competitiveness, as measured by the World Economic Forum’s Global Competitiveness Index. India is currently ranked 70 out of 140 countries for infrastructure quality in the Global Competitiveness Index.
The government of India has integrated various infrastructure projects under its infrastructure vision 2025 which are aligned with UN’S 2030 Sustainable Development Goals to improve the living standards of people resulting in a growing, sustainable and inclusive economy. The Indian Government has launched the National Infrastructure Pipeline (NIP) to invest US$ 1.5 trillion in infrastructure by 2025.
NIP incorporates initiatives on housing (Housing for All), roads (Bharatmala), ports (Sagarmala), railways (dedicated freight corridors, metros, and bullet trains), and airports (Udaan). During the fiscals 2020 to 2025, sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to ~71% of the projected infrastructure investments in India. NIP has a total of 9019 projects (Greenfield or Brownfield, under conceptualisation or under implementation or under Development – of project cost greater than Rs. 100 crore) worth US $ 1959.98 Billion of which 2443 projects are under development.
It is forecasted that the infrastructure sector in India will grow at a CAGR of approximately 7% from 2020 to 2025 (Source: Mordor Intelligence). Foreign investments are crucial for India as the country for overhauling its infrastructure sector such as ports, airports, and highways to boost growth. Infrastructure is one of the sectors which gets the highest foreign direct investment (FDI). The Asian Development Bank (ADB) has announced USD 100 million in funding for the Indian infrastructure sector through the government-promoted National Investment and Infrastructure Fund (NIIF).
For the latest fiscal (2021), infrastructure activities accounted for 13% share of the total FDI inflows in India. FDIs in the construction development sector (townships, housing, built up infrastructure and construction development projects) and construction Special topic: Indian infrastructure growth A story of continuous progress and transformation Sanjay Jayram Executive Vice President – Sales & Marketing (infrastructure) activities stood at US$ 26.08 billion and US$ 24.72 billion, respectively in FY’20-21. It is evident from these huge investment plans that the Government of India is actively striving toward stimulating construction activities in the country.
On the 75th Independence Day of India, the Prime Minister of India launched a National Master Plan GatiShakti (Speed & Power) for Multi-Modal Connectivity – essentially a digital platform to bring sixteen Ministries including railways and roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects. The National Master Plan (NMP) will employ modern technology and the latest IT tools for coordinated planning of infrastructure.
After the National Infrastructure Pipeline (NIP), this is a long impending reform in the direction of infrastructure development in India. NMP is a mark of paradigm shift and synchronous decision-making to create a world-class, seamless multi-modal transport network, on the back of which India will be transformed. This will ensure unprecedented focus on infrastructure through a holistic outlook – instead of planning and designing separately in silos, the projects will be designed and executed with a common vision. Improved connectivity will make Indian businesses more competitive.
India’s transport sector is expected to grow at a CAGR of 5.9 per cent thereby becoming the fastest growing area of India’s infrastructure sector. Transport includes well-developed roads and highways, a widespread railway network, fast-growing aviation and developing ports, and shipping and inland waterways infrastructure. Indian railways network is undergoing dynamic transformation, e.g. constructing dedicated freight corridors to support freight movements. Setting up of world-class cargo operations, and modernisation and up-gradation of railway stations are also underway. In FY21, the Indian Railways recorded the highest loading in freight transportation of 1,232.63 million tonnes generating a freight revenue of US$ 15.84 billion.
Highway construction in India increased at 17% CAGR between FY16-FY21. Despite the pandemic and lockdown, India has constructed 13,298 km of highways in FY21. The Roads & Highway sector is expected to account for 18% of capital expenditure of NIP over FY 2019- 25. In the sector, the Government of India’s policy to increase private sector participation has proved to be a boom for the infrastructure industry as many private players are entering the business through the public-private partnership (PPP) model.
There are new policies and trends which will boost steel intensity and demand e.g. mandatory crash barriers alongside highways, road stretches on high altitudes and industrial zones, and shift to continuously reinforced concrete pavements (CRCP) and concrete roads due to lower maintenance cost and higher life. Also, there is increasing focus on steel bridges due to their higher strength, durability and lifecycle value. These trends also project requirements of high strength as well as corrosion and weather-resistant steel for bridges.
India is expected to become the third-largest construction market globally by 2022. Also, the adoption of modern technologies and tools, and digitisation will increase synchronisation, coordination, speed and efficiency of developing infrastructure. The construction and infrastructure share in steel demand is 60-65% in India. Therefore, this infrastructure transformation journey will surely boost steel demand in India and it is projected to grow at a compound annual growth rate (CAGR) of 7 to 7.5% between fiscals 2022 and 2025.