Infrastructure Stocks

What is this theme all about?

Infrastructure being a key driver for the economy, this sector is highly responsible for propelling India’s overall development and has a multiplier effect. Also it enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development.

What are macro-economic factors driving this trend?

• In April 2020, the Government set a target of constructing roads worth Rs. 15 lakh crore (US$ 212.80 billion) in the next two years. Further in October 2020, the Central Government awarded a total of 322 projects to construct 12,413 km roads under the 'Bharatmala Pariyojana'.

• Indian energy sector is expected to offer investment opportunities worth US$ 300 billion over the next 10 years. The power demand for the growing country like India is substantially expected to go up.

• In October 2020, the Government of India invited proposals to install charging infrastructure on major highways and expressways in the country.

Why is this theme attractive now?

• The infrastructure sector has become the biggest focus area for the Government of India. India plans to spend US$ 1.4 trillion on infrastructure during 2019-23 to have a sustainable development of the country. The Government has suggested investment of Rs. 50,00,000 crore (US$ 750 billion) for railways infrastructure from 2018-30.

• Only 24% of the National Highway Network in India is four-lane, therefore presenting a massive opportunity for improvement. In March 2020, NHAI accomplished the highest ever highway construction of 3,979 km of national highways.

• Government has allocated Rs. 111 lakh crore (US$ 1.4 trillion) under the National Infrastructure Pipeline for FY 2019-25 and roads sector is likely to account for 18% capital expenditure over the same period.

• Initiatives like ‘Housing for all’, ‘Smart City Mission’ are capable to drive the growth in this sector. Affordable housing scheme has been a success leading to rise in the demand for the affordable segment of real estate. The growth is now fuelled by low interest rate environment.

What industries/ sectors benefit from this?

• The Indian logistics sector valued at USD 160 bn in 2019 is expected to become worth USD 215 bn in the next two years.

• Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower). 

• By 2022, solar energy is estimated to contribute 114 GW, followed by 67 GW from wind power and 15 GW from biomass and hydropower. The target for renewable energy has been increased to 227 GW by 2022.

Themes: Consumption | Digital India | Arogya India | Budget 2021-22 | Currency Sensitive | Financialization | Grameen Bharat | Growth |  Infrastructure | Leisure India | Transportation and Logistics