Infrastructure Sector gets a breather to fight COVID induced adversity
ECONOMY & POLICY

Infrastructure Sector gets a breather to fight COVID induced adversity

Before the lockdown, India saw a gradual slowdown in infrastructure investment mainly because of crippling issues like land acquisition and delays in environmental clearance. Irrespective, India continued to encourage PPP projects as well as the associated investments. The pandemic slowed down the infrastructure programme due to complete lockdown and decrease in demand as well as supply. 

The government had set up a National Infrastructure Pipeline (NIP) as a major pro-active initiative to invest about $1.5 trillion on infrastructure in the period up to FY 2025. NIP covers both economic and social infrastructure projects based on the updated Harmonised Master List of Infrastructure. NIP works through an interactive and dynamic online platform, the India Investment Grid that showcases the best investment opportunities in India to the global investor community. This grid provides a pan-India database for investment opportunities across sectors, track the progress of preferred projects and indicate interest, directly communicate with project promoters. In NIP, about 80 per cent of the investment would come from the central and the state governments. However, the pandemic has adversely affected all the plans including the NIP. 

In such a grim situation, the setting up of an infrastructure fund in India by a foreign investor is a big respite for the infrastructure sector. MIC Redwood 1 RSC Limited, which is the sovereign wealth fund for Abu Dhabi, United Arab Emirates has been given 100 per cent tax exemption by the Central Board of Direct Taxes for their investments in the infrastructure sector with the objective to give a boost to the infra investments in India.  

Meanwhile, the Reserve Bank of India also provided debt moratoriums and working capital support through margin reduction and recalibration of working capital cycle. The infrastructure sector is struggling to manage the liquidity and the priority is to ensure sources of liquidity to cope with any operational, CAPEX and debt related payments. For investors in Indian infrastructure assets, though the long-term story remains intact, the valuation assessment in the short term should be calibrated to the short-term challenges. The recent move of 100 per cent tax exemption would definitely attract more investments in the sector and improve the inflow of money in the sector.  

Recently, several notable transactions in roads, airports, telecom, electricity and solar have been awarded, which indicates that the Indian infrastructure sector is still attractive to investors not only in brownfield but also in high investment Greenfield projects. Infusion of funds from foreign investors implies the confidence in India’s infrastructure investments appetite and the fact that the foreign investors are betting on a stable Indian economy with a long-term strategy. 

To sustain the positive trend of investments in the infrastructure, the government is also opening up new sectors to private participation, like the railways (mainly railway stations and passenger trains), health and education. The government is also pushing for more PPP models for resource augmentation and efficiency improvements in infrastructure. However, even though certain exemptions are being offered, the government is keeping a strict vigil on the international best practices and quality control for such projects so that there is no dilution in quality or standards. 

Coupled with the amendments in the labour laws and improvement in the ease of doing business ranking, India is poised to see significant investments in projects on Ministry of Housing & Urban Affairs, National Highway Authority of India, Railways, state PWDs, energy, transport and water & sanitation. Foreign investments are crucial for the overhauling projects in infrastructure sector and the global struggle to move supply lines from China, a large captive market and massive pent up demand due to Covid-19 restrictions will definitely drive investments in ports, airports, highways, townships, construction development projects and energy resuming a strong trajectory of growth once the COVID effect subsides.

   
Author: Neeraj Dubey, Partner, Singh & Associates

Before the lockdown, India saw a gradual slowdown in infrastructure investment mainly because of crippling issues like land acquisition and delays in environmental clearance. Irrespective, India continued to encourage PPP projects as well as the associated investments. The pandemic slowed down the infrastructure programme due to complete lockdown and decrease in demand as well as supply. The government had set up a National Infrastructure Pipeline (NIP) as a major pro-active initiative to invest about $1.5 trillion on infrastructure in the period up to FY 2025. NIP covers both economic and social infrastructure projects based on the updated Harmonised Master List of Infrastructure. NIP works through an interactive and dynamic online platform, the India Investment Grid that showcases the best investment opportunities in India to the global investor community. This grid provides a pan-India database for investment opportunities across sectors, track the progress of preferred projects and indicate interest, directly communicate with project promoters. In NIP, about 80 per cent of the investment would come from the central and the state governments. However, the pandemic has adversely affected all the plans including the NIP. In such a grim situation, the setting up of an infrastructure fund in India by a foreign investor is a big respite for the infrastructure sector. MIC Redwood 1 RSC Limited, which is the sovereign wealth fund for Abu Dhabi, United Arab Emirates has been given 100 per cent tax exemption by the Central Board of Direct Taxes for their investments in the infrastructure sector with the objective to give a boost to the infra investments in India.  Meanwhile, the Reserve Bank of India also provided debt moratoriums and working capital support through margin reduction and recalibration of working capital cycle. The infrastructure sector is struggling to manage the liquidity and the priority is to ensure sources of liquidity to cope with any operational, CAPEX and debt related payments. For investors in Indian infrastructure assets, though the long-term story remains intact, the valuation assessment in the short term should be calibrated to the short-term challenges. The recent move of 100 per cent tax exemption would definitely attract more investments in the sector and improve the inflow of money in the sector.  Recently, several notable transactions in roads, airports, telecom, electricity and solar have been awarded, which indicates that the Indian infrastructure sector is still attractive to investors not only in brownfield but also in high investment Greenfield projects. Infusion of funds from foreign investors implies the confidence in India’s infrastructure investments appetite and the fact that the foreign investors are betting on a stable Indian economy with a long-term strategy. To sustain the positive trend of investments in the infrastructure, the government is also opening up new sectors to private participation, like the railways (mainly railway stations and passenger trains), health and education. The government is also pushing for more PPP models for resource augmentation and efficiency improvements in infrastructure. However, even though certain exemptions are being offered, the government is keeping a strict vigil on the international best practices and quality control for such projects so that there is no dilution in quality or standards. Coupled with the amendments in the labour laws and improvement in the ease of doing business ranking, India is poised to see significant investments in projects on Ministry of Housing & Urban Affairs, National Highway Authority of India, Railways, state PWDs, energy, transport and water & sanitation. Foreign investments are crucial for the overhauling projects in infrastructure sector and the global struggle to move supply lines from China, a large captive market and massive pent up demand due to Covid-19 restrictions will definitely drive investments in ports, airports, highways, townships, construction development projects and energy resuming a strong trajectory of growth once the COVID effect subsides.   Author: Neeraj Dubey, Partner, Singh & Associates

Next Story
Products

Viva ACP Launches FR A1-Rated Honeycomb Panels for Fire Safety

Viva, Asia’s largest manufacturer and supplier of aluminium composite panels (ACP) introduced its FR A1-rated Honeycomb Panels, setting a new industry benchmark for fire safety and architectural excellence. Engineered to deliver exceptional performance, these panels combine advanced fire-resistance technology with aesthetic versatility, offering a revolutionary solution for safety-critical environments.The FR A1 rating represents the highest standard of fire resistance under the European Standard EN 13501-1, signifying non-combustibility and zero contribution to fire, smoke, or toxic emissio..

Next Story
Real Estate

Almal Real Estate Expands into Commercial, Global Markets

Almal Real Estate Development is soon to announce its upcoming expansion into new verticals and international markets as part of its strategic growth plans for 2030. The company, known for its innovative luxury residential and hospitality developments, is preparing to diversify into the commercial sector with the introduction of The Smart Space, a network of business centers in UAE featuring five-star amenities. Additionally, Almal is entering new markets in Bali and Thailand as a community developer, focusing on villa and townhouse projects.The expansion into the commercial real estate sector..

Next Story
Infrastructure Urban

NABARD Approves Rs 9.03 Billion for 127 Projects in Himachal

The Himachal Pradesh government has secured approval from the National Bank for Agriculture and Rural Development (NABARD) for 127 projects worth Rs 9.03 billion for the 2024-25 fiscal, Chief Minister Sukhvinder Singh Sukhu announced. During a meeting with MLAs from Kangra, Kullu, Kinnaur, Solan, Chamba, Bilaspur, and Lahaul-Spiti districts to discuss priorities for the 2025-26 budget, Sukhu said the approved projects include 50 MLA-priority schemes under the Public Works Department, valued at Rs 4.12 billion, and 23 MLA-priority schemes under the Jal Shakti Vibhag, costing Rs 1.79 billio..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?