There is an urgent need to come up with highly effective strategies to stimulate growth in the infra sector, says Shashank Agarwal, Managing Director, Salasar Techno Engineering Ltd.
Infrastructure is a significant area for the general advancement of any country. In India, it is considered as the foundation of the nation’s economy. It incorporates projects on a more extensive scale and builds up its intensity on a worldwide level.
According to the approximations of a recent report – India will require Rs 50 trillion ($ 777.73 billion) in infrastructure by 2022 for sustainable development in the country. It is also marking a myriad of opportunities for foreign investors to invest in the country’s infrastructure development. Furthermore, the estimates shared by the Department for Promotion of Industry and Internal Trade (DPIIT) suggest – FDIs in the construction development and infrastructure activities stood at $ 17.22 billion in September 2020.
Rendering to the current market scenario, the Indian government plans to spend $1.4 trillion during 2019 – 2023 on infrastructure with an investment of $750 billion on railways infrastructure by 2030. On the further hand, the onset of the pandemic caused an unapproachable situation in front of infrastructure companies to recover from an all-time low of the previous year. This necessitates an urgent need to come up with highly effective strategies to stimulate growth in the sector.
A massive capital inflow is capital intensive and requires for the efficacious conclusion of infrastructure projects. The most impactful strategy to stimulate growth in the sector is an effective deployment of capital resources by the government. As per the recent budget – the government has announced the allocation of about Rs 1.07 lakh crore to the Ministry of Railways and Rs 25,933 crore to the Department of Telecommunications for capital expenditure.
Besides resource allocation, it is the need of the hour to introduce pan-India policies in the sector for standardization. Interdepartmental disparities tend to obstruct the progress of the projects significantly. This has been obvious in the telecom sector that possesses differentiated pricing by municipal corporations, for instance in Delhi. This becomes a huge detriment for the industry as a whole especially at the time when telecommunication is not a luxury, but a necessity. Thus, the sector needs a universal policy for smoother execution of projects and tenders.
Additional big challenge faced by large infrastructure companies is the sourcing of raw materials such as steel. Earlier, the infrastructure companies were needed to procure steel from primary producers who charged a premium, therefore driving up costs for the industry as a whole.
Recently, the ministry of steel released a clarification stating that the raw material can be procured from any producer. However, the implementation of such guidelines needs a great push in order to boost the industry’s growth by reducing the cost of raw materials.
In the past three years, there has been a buzz around the expansion of smart cities in India. Expediting the process of project approvals can help the government fulfil the mission of smart cities, and alleviate infrastructural gridlock in tier 1 and tier 2 cities, where most of the population is concentrated.