India’s road construction sector is poised for continued growth, with rating agency Icra projecting a 5-8% increase in road execution to reach 12,500-13,000 kilometres during the current fiscal year.
This forecast follows a robust expansion of 20% recorded in the previous fiscal, highlighting the resilience and momentum within the industry. According to Icra’s analysis, the acceleration in road execution for FY25 will be underpinned by several factors, including a substantial pipeline of projects, heightened government capital outlay, and a concerted focus on project completion by the Ministry of Road Transport and Highways (MoRTH).
The rating agency noted that road execution faced challenges during the first half of FY24 due to prolonged monsoon conditions in certain regions, which adversely impacted the number of productive days available for construction activities. Despite these challenges, Icra highlighted the Ministry’s robust project award pipeline, which stood at over 45,000 kilometres as of March 2024. This positive outlook persists despite the slowdown in project awards witnessed in FY24, primarily attributed to delays in securing Cabinet approval for revised cost estimates under the Bharatmala Pariyojana Phase 1 (BMP).
In FY24, overall project awards declined by 31%, dropping to 8,551 kilometres from 12,375 kilometres recorded in the previous fiscal. Icra drew parallels to similar trends observed in FY19 preceding the general elections, where project awards experienced a significant decline of over 67% year-on-year. The rating agency emphasised that the Engineering, Procurement, and Construction (EPC) mode remains predominant, accounting for 70-75% of the awards in FY24. Meanwhile, the Build, Operate, Transfer (BOT)-Hybrid Annuity Mode (HAM) captured a 25-30% share of the awards, with no awards under the BOT-Toll model during the fiscal.In March 2024, the Ministry implemented amendments to the BOT-Toll model concession agreement aimed at enhancing its attractiveness, signalling ongoing efforts to optimise project delivery mechanisms and drive sustained growth in India’s road infrastructure sector. Overall, Icra’s outlook underscores the resilience and potential of India’s road construction sector, poised to navigate challenges and capitalise on opportunities for continued expansion and development in the fiscal year ahead.
