MISSION 2025 INDIAN CONSTRUCTION INDUSTRY

The Indian construction industry is at the cusp of a major transformation aiming to become the world’s third-largest construction market. Construction Times explores how the largescale projects and mega development programmes revolutionizing India’s construction industry.

Construction industry always has a long-term vision and mission in setting the goals and working towards achieving its goals. A burgeoning housing economy and the Central Government’s massive infrastructure push are driving India’s construction boom. As per reports, the country is set to become the third-largest construction market globally following China and the US. Estimates show that the industry is set to reach $1.4 trillion by 2025. The Union Budget 2024-25 has also set the trend to achieve this goal with its key measures for infrastructure development and housing sector. 

Infrastructure development is the foundation for a country's economic prosperity and is critical for improving the quality of life of its citizens. India has witnessed a surge in infrastructure development, with strategic government investments and active private sector participation propelling the expansion of critical sectors. Programs like the Gati Shakti plan and National Infrastructure Pipeline are crucial in accelerating development, enhancing connectivity, and fostering urbanization. The roads & highways sector has gained momentum after a consolidated approach in highway construction under the Bharatmala Pariyojana programme that envisages the development of economic corridors, interstate corridors, and feeder routes.

Airports: Aiming a new high

Airport infrastructure development in India is picking up significant momentum, with a mix of government initiatives and substantial investments which is driving growth and modernization. A robust growth trajectory is driven by projections from the International Air Transport Association (IATA) and industry experts who foresee a compound annual growth rate (CAGR) of 6-8% over the next decade. The overall air passenger traffic is expected to witness a growth of around 8-11 per cent on-year to around 407-418 million in FY2025, according to a report by ICRA. The growth will be supported by strong pick-up in both leisure and business travel, improving connectivity to newer destinations in the domestic segment and the continued uptick in international travel. In FY2024, passenger traffic had already reached 376.4 million, up 15 per cent YoY, surpassing the pre-Covid level by 10 per cent.

By 2037, the Indian government expects the number of air travellers to reach around 520 million, positioning India as one of the fastest-growing aviation markets globally. 

The cornerstone of this growth is the government’s policies and programs. The UDAN scheme that aims to enhance regional connectivity by making air travel more affordable has already operationalized numerous regional airports. Additionally, the National Civil Aviation Policy (NCAP) provides a comprehensive framework for the aviation sector to take off on the back of infrastructure development and greater private participation. Public-Private Partnerships (PPP) have also contributed with the expansion of major airports across the country. PPP attracts private investment and expertise, leading to efficient and modern airport infrastructure.

Roads & Highways: The road ahead

India has been investing heavily in building world-class road infrastructure in the country over the years. The length of National Highways (NH) has increased about 1.6 times from 0.91 lakh km in 2013-14 to 1.46 lakh km currently. There has been a significant increase in the pace of award and construction of NH in the country in the last 10 years. For instance, the average annual pace of award of NH contracts has increased by 2.75 times from about 4,000 km in 2004-14 to about 11,000 km in 2014-24. Similarly, the average annual construction of NHs has also increased by about 2.4 times from about 4,000 km in 2004-14 to about 9,600 km in 2014-24. The total capital investment in NHs including private investment has increased by six times from Rs 50,000 crore in 2013-14 to about Rs 3.1 lakh crore in 2023-24.

As per recent reports, the Ministry of Road Transport and Highways (MoRTH) has extended the deadline to construct 11 more highways and expressways by next year. The total length of these 11 highways and expressways will be 5,467 km and will pass through 16 states. These include: Delhi-Mumbai (1,350 km) Delhi-Katra (670 km), Delhi-Dehradun (210 km), Raipur-Hyderabad (330 km), Indore-Hyderabad (713 km), Surat-Solapur (464 km), Nagpur-Vijayawada (457 km), Chennai-Salem (277 km), Solapur-Kuntloor (318 km), Nagpur-Vijayawada (457 km) and Hyderabad-Visakhapatnam (221 km).

Apart from this, the Cabinet Committee of Economic Affairs has approved the development of eight important National High-Speed Corridor projects with a length of 936 km at a cost of Rs 50,655 crore across the country.

Railways on fast track

Indian Railways has made remarkable strides on its transformative journey, with a slew of records and achievements in 2023. The year saw a notable increase in originating freight loading, with 1,512 million tonnes, marking a significant 7% growth over the previous year. Accompanying this success was a substantial rise in revenue, with Indian Railways earning a staggering USD 19.2 billion from freight alone. Passenger patronage surged by over 80%, reaching 6.2 billion in FY 2022-23 compared to 3.4 billion in FY2021-22. Moreover, the Gross Budgetary Support skyrocketed to USD 28.7 billion for the fiscal year 2023-24, marking a thirty-fold increase over 2004-05 levels and an eight-fold increase over 2013-14.

In terms of infrastructure, the Amrit Bharat scheme has identified 1,309 stations for redevelopment, with three stations already redeveloped to significantly enhance passenger amenities. Foundation stones for more than 500 stations have been laid in 2023. With each milestone achieved, Indian Railways continues to epitomize progress and efficiency in the realm of transportation. This momentum was fuelled by substantial capital expenditure, with the highest-ever utilization rate of 75% recorded in the first nine months of the fiscal year 2023.

Indian Railways plays a pivotal role in reducing logistics cost by aiming to increase its modal share in freight transportation from 27% to 45% by 2030. This endeavour encompasses infrastructure development, including the creation of Dedicated Freight Corridors, policy reforms to attract freight from non-traditional sources, and the induction of a significant number of wagons to meet the growing demand.

In the current budget, one of the key highlights is implementation of three major economic railway corridor programmes namely energy, mineral and cement corridors; port connectivity corridors; and high traffic density corridors. Overall, through these three corridors, about 40,000 km of new tracks will be laid which will significantly increase railway capacity and reduce pollution as railway can save up to 90% of CO2 emissions in a cost-effective manner. This will bring a big transformation in the country’s economy in an efficient, productive, and sustainable manner.

To capture the environmental & economic benefits of electric traction, Indian Railways plans to achieve 100% electrification of its broad-gauge routes by 2024. With more than 94% of the route electrified, 100% electrification is expected to result in an annual energy savings of around USD 1.55 billion. Indian Railways has set a target of becoming a ‘net-zero carbon emitter’ by 2030, by generating energy through renewable sources. It aims to set up 20 GW capacity solar power plants on its land, to power its network and infrastructure. In this regard, more than 1,000 railway stations have already been solarised. Several other initiatives also have been taken to reduce the carbon emissions in railways.

Ports – new horizons

Indian ports sector has undergone remarkable advancements in recent years, witnessing significant improvements in both infrastructure and efficiency in operations. The implementation of mechanisation, automation, and state-of-the-art technologies have led to a substantial increase in operational efficiency, resulting in streamlined cargo handling processes and reduced turnaround times.

Infrastructure development projects, such as the Sagarmala Program, have played a pivotal role in reducing logistics costs. India’s improved position in the World Bank’s Logistics Performance Index is a testament to the concerted efforts made by the government and industry stakeholders in strengthening the Indian ports sector. This recognition highlights India’s enhanced competitiveness in the global market, opening up new opportunities for trade & economic growth making it an attractive destination for manufacturing and services.

Under the Sagarmala initiative, nearly Rs 32,066 crores has already been invested in port modernization projects till March 2024 whereas another Rs 75,650 crore worth of projects are under various stages of implementation. These projects focus on capacity enhancement at major ports as well as efficiency improvement. Additionally, GoI has also invested in improving port connectivity to the hinterlands through improvement in rail and road connectivity, which has resulted in faster evacuation of the arriving cargo from the ports.

Transhipment is another emerging development in India with a few container ports and terminals coming up. Currently, around 25% of the total container cargo handled at the Indian ports is transhipped and around 75% of this volume is handled outside the Indian ports. The same results in revenue loss for the Indian ports, longer lead time, and additional logistics costs for the end users.

Going forward, with the development of the Vizhinjam port a part of the Indian transshipped volumes is expected to be handled through the port which should result in lower logistics costs. GoI is also looking at developing a transshipment terminal in the Andaman Island’s Galathea Bay with a total investment of $9 billion, although the project is still in the drawing board stage. However, once the project is commissioned it will provide a strong alternative to other transshipment hubs in the region which are increasingly facing challenges of congestion. The new major port coming up at Vadhvan in Maharashtra will also add to the container transshipment potential of the country.

Water infrastructure

Over the past decade, India’s water infrastructure has undergone a remarkable transformation, driven largely by the Government of India’s committed focus and strategic investments. The formation of the Ministry of Jal Shakti in 2019 was a significant milestone, consolidating all water-related policies and initiatives under one umbrella, which allowed for more streamlined and effective implementation.

The Jal Jeevan Mission (JJM) is perhaps the world’s largest program aimed at providing piped water to every rural household by 2024. This ambitious project has already made significant progress, with millions of homes now having access to safe drinking water. India’s water sector has also seen substantial budget allocations, with the Ministry of Jal Shakti receiving a significant portion of the national budget to drive these initiatives. For example, Namami Gange has been pivotal in rejuvenating the Ganga river and its tributaries.

Wastewater recycling and reuse is a major focus today to reduce dependence of groundwater resources which are gradually depleting over the years. The government has introduced policies that encourage industries to adopt Zero Liquid Discharge (ZLD) systems and utilize treated wastewater for industrial processes, thereby reducing the strain on freshwater resources. This aligns with the National Framework on Recycle & Reuse, which aims to make treated wastewater a mainstream water resource.

The concept of desalination, particularly in coastal regions, is also gaining traction. NITI Aayog has been exploring desalination as an alternative source of water to mitigate the stress on traditional water resources. The desalination plants in Minjur and Perur in Chennai, are prime examples of how desalination can play a critical role in ensuring water security for urban areas.

Going forward, the water and wastewater management sector in India is poised for robust growth. The growing gap between water supply and demand, coupled with India’s aspirations for sustainable development, will drive increased investment and innovation in this sector. For this, prioritizing advanced technologies, fostering private sector participation, and enhancing community engagement, are needed.

Energy: Towards a greener future

India’s power demand has grown considerably in the last decade inline with the population growth and industry development. The new developments happening in electric vehicles and the spurt in the usage of mobiles and electronic gadgets is also pushing the demand for power in the country.

According to the government estimates, there is adequate availability of power in the country as of now. The government has addressed the critical issue of power deficiency by adding 2,14,237 MW of generation capacity in the last ten years transforming the country from power deficit to power sufficient. The generation capacity has increased by 79.5% from 2,48,554 MW in March 2014 to 4,46,190 MW in June 2024.

Government has added 1,95,181 ckt kilometre of transmission lines since April 2014 connecting the whole country into one grid running on one frequency. This has enabled us to transfer 1,18,740 MW from one corner of the country to another. The power supply in urban areas has increased to 23.4 hours in 2024. The demand-supply gap between energy requirement and supply has come down from 4.2% in 2013-14 to 0.1% in FY 2024-25 (till June 2024). Even this gap is generally on account of constraints in the state transmission/distribution network and financial constraints of DISCOMs etc.

India is fast emerging as a major market for renewable energy. India was ranked fourth in wind power capacity and solar power capacity, and fourth in renewable energy installed capacity, as of 2023. As of March 2024, renewable energy sources, including biomass, waste to power and waste to energy, have a combined installed capacity of 143.64 GW. India's installed renewable energy capacity is expected to increase to about 170 GW by March 2025 from the level of 135 GW as of December 2023, according to ICRA.

NIP to lead infra push

Infrastructure is the backbone of any growing economy and India is striving towards becoming a developed nation. The journey is challenging but inspiring for the nation and its people. India’s infrastructure development has taken a unified direction with the launch of National Infrastructure Pipeline (NIP) in 2019 by the Central Government with a target investment of Rs 111 trillion. The NIP investments are concentrated in five major sectors - roads, railways, renewable energy, affordable housing and irrigation across 15 major states. The NIP was launched with a forward-looking approach to provide high quality infrastructure across the country during FY 2020-25. While many projects took of under this mega scheme, a lot remain to be completed. The Mission 2025 will definitely be the task of achieving most of these goals.