Manish Agarwal, Leader, Capital Projects and Infrastructure, PwC India
The macro-medium term outlook for transport infrastructure is positive, with massive investments required globally as well as in India.
According to PwC estimates, the global infrastructure market will double from 4 trillion USD in 2013 to 9 trillion USD and Asia Pacific’s share will increase to 60% by 2025.
PwC’s report, Future of India: The Winning Leap estimates that India needs to grow at the rate of 9% per annum to achieve its development goals. Enabling this will require logistics costs to reduce from 13 to 8% of the GDP. Investments in rail and inland waterways will need to be disproportionately higher than road in order to facilitate this reduction.
However, it is the micro-short term that drives business plans; especially in terms of infrastructure, where the micro picture is considerably different from the macro potential.
After a euphoric rise in investments during 2008-2011, the slowdown in the sector has been equally dramatic. However, in line with several sections of the economy now beginning to look positively towards the future, infrastructure investors are also becoming increasingly optimistic.
We believe the optimism is largely driven by the government’s initiatives to kickstart the construction cycle by increasing public sector spending. For this to sustain, private investments have to make a grand comeback. Initiatives such as rebalancing risks in PPP structures, reforming the regulatory environment and easing dispute resolutions, can make the investment cycle self-sustaining.
Among the world’s 250 largest infrastructure companies, only four are Indian and only two feature in the 100 largest. Given the emerging opportunities within India as well as across the globe, what is it that Indian companies need to do in order to scale up and build capabilities, in order to play on the global stage?