India's Core Infrastructure Investments to Surge by 38% in FY25 and FY26

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India's Core Infrastructure Investments to Surge by 38% in FY25 and FY26

Team Finance Saathi

19/Jun/2024

Key Points:

India's infrastructure investments are set to surge by 38% in FY25 and FY26, reaching US$ 179.86 billion.
The renewable energy sector will see significant growth with 50 GW of capacity additions planned.
Real estate and road sectors are also poised for robust expansion, with strong demand and increased construction activities.

India's core infrastructure sectors, including renewable energy, road construction, and real estate, are poised for substantial growth in the fiscal years 2025 and 2026. According to projections by CRISIL Ratings, investments in these critical areas are expected to increase by 38%, reaching a staggering US$ 179.86 billion (Rs. 15 lakh crore). This significant uptick is attributed to supportive policy measures and enhanced credit profiles across these industries.

Focus on Sustainable Infrastructure: Senior Director and Chief Rating Officer at CRISIL Ratings, Mr. Krishnan Sitaraman, underscored the country's commitment to sustainable infrastructure development. This focus is evident in the planned expansion of green energy capacities and the enhancement of road networks. The Indian government’s proactive approach in implementing favorable policies has created a conducive environment for infrastructure growth.

Renewable Energy: A Strong Pipeline: The renewable energy sector in India is on the cusp of a major transformation. In FY24, the sector witnessed record auctions totaling 35 GW, forming a robust pipeline for future projects. The momentum is expected to continue with plans to add 50 GW of renewable energy capacity over the next two fiscal years. This expansion is crucial for India's ambitious goal of achieving substantial reductions in carbon emissions and increasing the share of renewables in its energy mix.

Road Sector: Expansion and Growth: The road sector is another critical area set for significant growth. The construction of highways is projected to rise by 11%, reaching 12,500 km annually. This expansion is essential for improving connectivity, reducing transportation costs, and boosting economic activities across the country. The government's focus on building a world-class road infrastructure is a key driver of this growth, supported by increased budget allocations and policy initiatives.

Real Estate: Commercial and Residential Growth: The real estate sector in India continues to show resilience and growth. Demand for commercial office space is projected to grow by 8-10%, driven by the expansion of businesses and the entry of new enterprises. Simultaneously, the residential real estate segment is expected to witness robust growth of 8-12%, fueled by increasing urbanization, rising incomes, and supportive government policies such as affordable housing schemes.

Role of Investment Trusts: CRISIL Ratings highlighted the significant role of infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) in attracting capital. Over the past two fiscal years, these trusts have mobilized over US$ 23.98 billion (Rs. 2 lakh crore) in equity capital. This influx of capital has reinforced the financial strength of private sector players, enabling them to undertake large-scale infrastructure projects.

Challenges and Risks: Despite the optimistic outlook, there are potential challenges that need to be addressed to sustain growth momentum. Delays in commissioning renewable energy projects could hinder progress in this critical sector. Budgetary constraints in road development may affect the pace of construction and maintenance activities. Additionally, managing inventory levels in the real estate sector, particularly in the residential segment, poses a significant challenge.

Conclusion: In conclusion, India's core infrastructure sectors are on a robust growth trajectory, supported by favorable policies, improved credit profiles, and significant capital inflows. The projected 38% surge in investments by FY25 and FY26 is a testament to the country's commitment to building sustainable and resilient infrastructure. However, careful monitoring of potential challenges is essential to ensure the realization of these ambitious growth targets.

The developments in renewable energy, road construction, and real estate will play a crucial role in shaping India's economic future. With a focus on sustainable growth and strategic investments, India is well-positioned to achieve its infrastructure goals, driving economic prosperity and improving the quality of life for its citizens. As these sectors continue to expand, they will create numerous opportunities for businesses, investors, and the workforce, contributing to the overall development of the nation.

Also Read : Digital Lending Sees a Surge: $17.53 Billion Disbursed in FY24, a 49% Increase

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India's Core Infrastructure Investments to Surge by 38% in FY25 and FY26

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