Credit rating agency, ICRA in its latest report has said that the revival of irrigation sector backed by adequate funding support may add to the order inflow of construction companies. It added that the government investment in urban infrastructure segments has helped construction companies improve their order book positions and the revival of irrigation sector is beneficial for construction companies.
The rating agency said that the revival of irrigation sector backed by adequate funding support is a credit positive for construction companies. It noted that irrigation sector has witnessed good traction over the last one year and is likely to see improved execution with increased funding support from the State and the Central Governments budgetary allocation and the Long Term Irrigation Fund (LTIF) of NABARD.
The report pointed that states like Telangana have significantly increased allocation towards the irrigation sector to fast track the development of irrigation projects and added that while funding issues for these projects are largely addressed with fund availability from LTIF, other execution impediments could still delay completion of many projects.
The report stated that the construction sector’s gross value added (GVA) witnessed a YoY growth of 2.7 percent during Q3 FY2017 which is similar to the modest growth witnessed in the past quarters. Besides, it said that the growth in the construction GVA despite the disruption in the execution caused by the demonetisation reflects the resilience of the organised construction sector. In view of government’s fiscal targets and other increased expenditures, the agency noted that the revival of public private partnership is crucial for improving the pace of infrastructure development.