Abstract
India’s construction industry will continue to exhibit strong growth
over our forecast period, although it
will be far reduced from the levels
seen before 2008. In BMI’s Q209 India Infrastructure Report, we
have
used a new methodology for our forecasting method which aims to increase the
relevance and
reliability of BMI’s infrastructure data. We are
forecasting real growth of 5.4% in the construction
industry in 2009, to
reach a value of INR4,200bn.
Despite the global downturn and much reduced
growth forecast for 2009, India is exhibiting enviable
growth compared to
many other countries around the world. This is illustrated through the number
of
projects recorded in the construction industry’s subsectors in
late 2008 and thus far in 2009.
The power sector has seen probably the
largest amount of activity. Most of which is has followed the
opening up
of the country’s nuclear power sector in late 2008. Negotiations are
ongoing with
international majors in the nuclear power sector from France,
Russia and the US, as companies fight to
get a slice of the very
profitable sector. In March GE Hitachi Nuclear and Bharat Heavy
Electricals
Limited (BEHL) signed an agreement with India’s
state-run nuclear monopoly, Nuclear Power
Corporation of India Limited
(NPCIL), to co-operate in the construction of nuclear reactors. In
February, France’s Areva signed an MoU with NPCIL for the construction
of six reactors and discussions
with Russia’s Atomstroyexport are
still ongoing also for the supply of six reactors.
The transport sector
has also seen ongoing activity, with the expansion of Chennai Airport. The
Port
sector, which has been suffering from the decline in global exports,
received good news in February when
the India-focused fund of UK private
equity group 3i announced it would invest US$161mn for a stake in
the deep
water port of Krishnapatnam, which is being developed under
design-finance-build and operate
initiative for 30 years.
Infrastructure investment in the region of US$500bn is being planned between
2007 and 2012 under the
government’s 11th five-year plan. Of this,
utilities will receive the largest portion with US$167bn, roads
will be
allocated US$92bn, railways US$65bn, ports US$22bn and airports US$8bn. The
government
envisages 30% of the total amount in the plan to come from
private sector companies through public
private partnerships (PPPs).
However, the global economic downturn has highlighted the barriers in
India’s infrastructure sector, which may harm the government’s
ability to attract private sector
participation, especially at a time of
risk aversion and tightening access to credit.
However, BMI believes that
there are strong fundamentals to growth in the industry. Growing demand
from a fast-expanding population (forecast to reach 1.34bn by 2018) will
continue the need for increased
capacity in the country' s transport and
utilities sectors. Strong economic growth of 6.5% on average per
year
between 2009 and 2013 is forecast, which will increase demand for
infrastructure, however, if it is
not up to scratch, it could hinder the
achievement of this rate.
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