India’s infrastructure sector is poised for substantial growth with investments expected to rise by 38% to Rs 15 trillion by the fiscal year 2025-26, driven primarily by advancements in roads, renewable energy, and real estate, according to Crisil Ratings.
Crisil’s latest analysis highlights that the roads sector will play a pivotal role, accounting for 60% of the total infrastructure investments. The anticipated capital outlay for roads alone is projected at Rs 9 trillion for the fiscal years 2025-26, with significant contributions from both central and state governments. Notably, the private sector’s share is expected to increase, reflecting improved investment sentiments and conducive policy frameworks.
The robust order books of road developers are expected to support an 11% growth rate in highway construction, targeting approximately 12,500 kilometers annually over the next two fiscal years. This growth is underpinned by strong awarding in recent years, bolstering developer confidence and execution capabilities. Investment trusts specializing in infrastructure (InVITs), particularly in the roads sector, are poised for expansion. Currently managing assets worth Rs 2 trillion, these InVITs are projected to grow to Rs 3 trillion in the current fiscal year. They provide critical liquidity and exit avenues for developers, facilitating the commencement of new projects and sustaining sectoral growth.
In the renewables sector, Crisil forecasts investments totaling Rs 3 trillion over the next two years, driven by escalating demand for sustainable energy solutions. This surge aims to add 50 gigawatts (GW) to India’s renewable energy capacity by FY26, pushing the total capacity to 180 GW. The government’s ambitious target of achieving 500 GW of non-fossil fuel energy capacity by 2030 is a key driver, stimulating robust auction activities and fostering a pipeline of 75 GW.
However, Crisil identifies challenges, particularly in the deployment of storage-linked capacities within the renewable sector. Despite significant auctioned capacity, nearly 7 GW projects are yet to secure off-takers due to higher tariffs and logistical complexities. The development of storage infrastructure remains pivotal to harnessing the intermittent nature of renewable energy sources effectively.
In the real estate segment, India anticipates steady growth with commercial office space leasing projected to increase by 8-10% annually. This growth is propelled by global firms establishing capability centers in India, attracted by the vast talent pool and competitive rental rates. Similarly, residential real estate is expected to sustain a growth rate of 10-12% this fiscal year, supported by favorable affordability and regulatory reforms that have reduced inventory levels. Crisil maintains a positive outlook on the credit and operational performance of infrastructure sectors amid high growth trajectories. The convergence of government policies, private investments, and technological advancements is set to redefine India’s infrastructure landscape, fostering economic resilience and sustainability in the years ahead.
