Report: India’s focus on transport and urban infrastructure development creates a promising outlook for the domestic construction industry

India’s construction industry is set to grow at a compound annual growth rate (CAGR) of 5.65% in output value in real terms from 2016 to 2020, according to a report by Timetric. Investments in road, residential and energy infrastructure projects are expected to provide an impetus for growth in this sector leading to an increase in the CAGR from 2.95% (2011-2015).

The report titled ‘Construction in India – Key Trends and Opportunities to 2020‘ highlights the impact of urbanisation, industrialisation and the country’s growing population on the construction industry. The government has also launched a number of schemes and programmes to attract investment in this sector.

Emphasis is being given to develop transport infrastructure by providing greater support to road construction projects under the PPP model. The Ministry of Road Transport and Highways has discussed plans to award 100 highway construction projects to the private sector in its bid to spur development of road infrastructure, leading to the expansion of the construction sector.

A new scheme, Atal Mission for Urban Rejuvenation and Transformation (AMRUT), has been introduced for 500 towns and cities targeting urban progress and rehabilitation. It is focused on establishing primary infrastructure facilities including transportation, water supply, sewerage connection, green spaces and parks.

The Timetric report further adds that the construction sector will also benefit from a gambit of schemes proposed by the authorities for transport, housing and power, such as 100 Smart Cities Mission and Housing for All, which will increase the demand for construction.

Even though the industry’s future prospects appear bright, the report cautions against growth hurdles including limited funding, slow policy reforms and a weak currency that might overshadow the effect of reforms in the sector initially.