Investment in Infrastructure development is the key driver for the economy, therefore the government of India has been constantly investing to upgrade the country’s infrastructure and attracted the huge investment from both foreign and domestic players in various infrastructure projects and expected huge investment in coming years after the liberalisation in various radical policies.
Apart from attracting funding in infrastructure sector from foreign and domestic players, Government of India itself invested Rs 2.83 lakh crore in last two financial years FY 2015 and FY 2016 in major Infrastructure Schemes.
Recently government has informed Parliament that it had invested Rs 1.04 Lakh crore in roads and highways sector and Rs 1.52 lakh crore on railway infrastructures in last two fiscal (FY15 & FY16) and invested Rs 25,878 crore in major ports during the period.
In a written reply to Rajya Sabha, Minister of State for Finance Mr. Arjun Ram Meghwal said, “During Financial Year (FY) 2014-15 and 2015-16, projects involving investment of Rs. 25,878 crore were awarded by Major Ports. National Highway Authority of India (NHAI) responsible for construction of major roads and highways in India invested Rs. 41,087 crore and Rs. 63,803 crore in FY 2014-15 and 2015-16, respectively. Ministry of Railways has spent a total of Rs. 58,718 crore and Rs 93,795 crore in FY 2014-15 and FY 2015-16, respectively on development of railway infrastructure.”
As per the information provided by Reserve Bank of India (RBI), Foreign Direct Investment (FDI) of Rs. 1.17 lakh crore was received in infrastructure sector, including Roads, Railways, and Ports etc in last two years.
Indian government has launched various innovative financial vehicles to attract the investment in infrastructure sector, such as Infrastructure Debt Funds (IDFs), Real Estate Investment Trusts (REITs)/Infrastructure Investment Trust (InVITs), National Infrastructure Investment Fund (NIIF), issuance of Tax Free Bonds, Asset Reconstruction Companies (ARCs), 5/25 Scheme to extend long tenor loans to infrastructure projects, take-out finance and various other important schemes have been launched by the government in the favour of infrastructure sector to attract more investment.
In Union Budget FY2016-17, Government has announced Rs 2.21 lakh crore budgetary allocations for infrastructure sector. The investment outlay for FY2017 shows that government has increased investment as compared to last two financial years.
Going forward, Government has planned to spend around Rs. 7 lakh crore to develop National Highways of around 50,000 km in the next 5 years. Recently, National Highway Authority of India (NHAI) announced that around 1 lakh crore will be invested in road projects in 2016-17.
As we are aware, construction equipment market is entirely depends on infrastructure activities in the country. The earlier investment in last two fiscal started reflecting on sell of construction equipment in the country after a gap of four years.
Road and highways development, Port development, construction of Greenfield Airports and Brownfield airports, Railway infrastructure development, 100 Smart Cities, investment in urban transportation like Metro rail projects in various cities, Solar Power projects to meet the target 175 GW of renewable energy capacities by 2022, over all urban development will attract the huge investment in the country and will lead to the sale of the construction equipment.
By Keeping the future investment of India in infrastructure sector, Global Report Construction Equipment 2015 prepared by World Highways cited the projection of Indian Construction Equipment Manufacturer’s Association (ICEMA) that Indian Earthmoving and Construction Equipment (ECE) market would touch USD 16 billion–USD 21 billion market from USD 3 billion and expected to grow by 20-25% over the next few years to reach 330,000 units to 450,000 units sold by 2020.
Source: Information has been obtained from government release, ICEMA, World Highways