The Government has announced commitments to build large infrastructure projects through significant public expenditure and with the help of private partners – including foreign investors. There are some areas in infrastructure where the externalities caused by projects cannot be captured by project revenues alone. Therefore, the government has created a Viability Gap Funding arrangement through a window in the Finance Ministry.

Urbanization is an opportunity and priority so the government ha srolled out two inter-linked programmes – Smart Cities Mission and the AMRUT.

The Smart Cities Mission aims at building 100 Smart Cities with the state-of-art amenities. These Cities have started implementing various projects like Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks.

To Preserve and revitalize soul of the heritage cities in India, National Heritage City Development and Augmentation Yojana (HRIDAY) has been taken up in a major way. The AMRUT programme focuses on providing water supply to all households in 500 cities.

The government also ensured to leverage the India Infrastructure Finance Corporation Limited (IIFCL) to help finance major infrastructure projects, including investments in education and health infrastructure, on strategic and larger societal benefit considerations.

Ambitious Bharatmala Pariyojanahas been approved for providing seamless connectivity of interior and backward areas and borders of the country.

Power Sector:

The PPAs would seek to cover 100% of the annual average demand of a particular state or a discom. The government’s strategy is aimed at improving India’s per capita power consumption, which is around 1000 kWh among the lowest in the world. The government also talked about a radical plan to separate the so-called carriage and content operations of existing power distribution companies. Carriage refers to the distribution aspect and content to electrify itself.

The separation will allow people and companies in India buy electricity from a power company of their choice, and have it supplied to them by the distribution network that services the neighbourhood in which they live. The result, apart from the choice of consumers, would be lower tariffs because of the competition. This will help in reduction of cross-subsidies borne by the industry, and make tariffs more competitive for businesses thereby pushing the government’s ‘Make in India’ drive. With its draft national energy policy, Government’s policy think-tank NITI Ayog has pitched for DBT in the electricity sector.

Housing:

The Housing for All Mission aims to build on Rajiv Awas Yojana (RAY) and fully address the housing shortage by 2022.

Transport:

Specific actins taken by Government include the development of inland waterways, coastal shipping, dedicated freight corridors in railways, electronic tolling system, development of public transport including metro, bus rapid common ticketing for urban treansport etc.

The strong advantages of infrastructure development in India are governed by huge demand as it has a requirement of investment worth Rs. 50 trillion in infrastructure by 2022 to have sustainable development in the country.

Interestingly strong policy support like the ‘Housing for All’ and 'Smart Cities Mission' the Government of India is working on reducing bottlenecks pushing growth in the infrastructure sector. With the UDAY Scheme, that will help in financial turnaround and revival of electricity distribution companies of India, the power sector has been registering strong growth. Also 100% FDI is permitted under the various infrastructure sectors. A strong momentum is also over served in the expansion of roadways.

The eight core infrastructure industries include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity. The overall index grew by 4.8% during FY 2016-17. The growth drivers for infrastructure in India are Government Initiatives, Infrastructure Need, Housing Development, International Investment and Public-Private Partnerships.

Public Private Partnership:

The Government is attempting to revive and give a boost to Public-Private Partnerships. Japanese investment has played a significant role in India’s growth story. Japan has pledged investments of around US$35 billion for the period of 2014-19 to boost India’s manufacturing and infrastructure sectors. The Japanese government is constantly looking for investment opportunities in India. Asian Development Bank will provide US$ 275 million loans for a piped water supply project for rapidly urbanizing small towns, covering 3 lakh households, in Madhya Pradesh. India will need to construct 43000 houses every day until 2022 to achieve the vision of Housing for All by 2022. Hundreds of new cities need to be developed over the next decade under the smart city programme. This has the potential for catapulting India to third largest construction market globally. The sector is expected to contribute 15% to the Indian economy by 2030. The recent policy reforms such as Real Estate Act, GST, REITs, steps to reduce approval delays etc are only going to strengthen the real estate and construction sector.

Recent Budget Provisions:

The Union Budget 2018 has identified infrastructure sector as the growth drivers of Indian Economy and essential for further economic development.  

The Government has set aside Rs. 21,000 crore for building 5.1 million rural houses under the Prime Minister Awas Yojana (PMAY). Sectors including cement, steel, paints, sanitary ware and electricals could benefit from the Government’s decision to step up its affordable housing drive. The Government will create a dedicated Affordable Housing Fund in National Housing Bank. An interesting subsidy will be provided to rural households that are not covered under PMAY.

The budget also levied a Rs. 8 per liter road and infrastructure cess on imported petrol and diesel. The government and market regulators also have taken necessary measures for development of monetizing vehicles like Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (ReITS).