Infra investments to double to Rs 143 trn in FY24-FY30
Infrastructure investments in India – public and private – will more than double in the seven-year period ending March 2030, to Rs 143 trillion, as compared to Rs 66.7 trillion between 2017 and 2023, according to a report.
These investments could play a crucial role in doubling the size of the economy to $6.3 trillion by FY31.
According Crisil’s Infrastructure Yearbook 2023, 70% of the initial NIP goal may be achieved by the end of FY25.
The report, however, identified a few policy impetuses required for ambitious goals to be realised. These include elaborate legal arrangements to ensure proper distribution of pay-offs and risk sharing to align incentives. It is also essential to develop new instruments, deepen the secondary corporate bond markets and tap into ESG funding (investments that are decided based on environmental, social and governance principles), it added.
The next phase of infrastructure development will be marked by growth in the average ticket size of projects and a significant number of mega-scale projects, Crisil said.
Appropriate and consistent policy and regulatory interventions and focus on timely execution build an attractive case for various stakeholders to accelerate investments across infrastructure sectors, it added.
“While the lion share of investments will come from the government in roads, railways and urban sector, the private sector is increasingly focussed on energy and transportation sectors,” senior director (transport, mobility and logistics) at Crisil Jagannarayan Padmanabhan said.
As for NIP, the Centre so far contributed 49% of the total investments, state governments 29% leaving the balance to be covered by the private sector. While roads, railways, urban and other infrastructure have drawn on government funding the private sector has dominated power and industrial sectors in terms of investments.
Of the total projected infrastructure spend till 2030, Rs 36.6 trillion or 26% will be green investments. This will be five times more than the amount invested in 2017-2023. “The biggest share in green investments of Rs 30.3 trillion will be in renewable energy followed by Rs 6.3 trillion in transportation,” Crisil said.
Of the total green investments in the power sector, non-fossil fuel additions will account for 78% of the share at Rs 22.4 trillion. Green infrastructure investments of Rs 3.9 trillion are expected till 2030 and the remaining will be in efficiency improvements and smart meters.
The green investments would be up to 75% financed by debt. Rest will some from equity, asset monetization and foreign direct investment. Debt will include overseas bonds and external commercial borrowings and loans from non bank finance companies and banks themselves. Tax incentives for investments in green bonds should also be considered.
Out of the total investments of Rs 7 trillion in the transport sector, 90% will be in green. The sharp increase in investments will be led by electrification of transportation sectors which will see investments increase in sectors like battery manufacturing, electric charging infrastructure and component manufacturing for electric vehicles. The hydrogen sector is expected to attract investments of Rs 1.5 trillion.
Among the sectors with the highest investment attractiveness score, roads and highways tops the list followed by power transmission, renewable energy and ports. At the bottom are conventional power generation, power distribution and urban infrastructure. Sandwiched between the two extremes is oil and gas, mining, airports, electric vehicles ecosystem and railways.