India is projected to witness a 5-8 percent year-on-year increase in national highway construction, reaching 12,500-13,000 km by March 2025.
India’s national highway construction pace is anticipated to expand by 5-8 percent year-on-year to 12,500-13,000 km in the fiscal year ending March 2025. ICRA forecasts a growth in road execution after a remarkable surge of approximately 20 percent in FY24.
The anticipated pace of execution for this fiscal year is attributed to a healthy pipeline of projects and increased capital outlay by the Government of India (GoI). The Ministry of Road Transport and Highways (MoRTH) is expected to prioritise project completions, according to the ratings agency.
Despite challenges such as the impact of prolonged monsoons on productivity during the first half of FY24, road construction saw a surge of 30 percent year-on-year in the second half of the fiscal year, resulting in an overall growth of around 20 percent in FY24.
Vinay Kumar G, VP and Sector Head Corporate Ratings at ICRA, noted that this growth was supported by the ministry’s focus on completing projects before the general elections. ICRA anticipates that the momentum in road construction will continue into FY2025.
The Ministry’s project award pipeline remains robust, standing at over 45,000 km as of March 2024. Despite challenges in awarding projects in FY24 due to delays in approval for revised cost estimates, ICRA expects sustained momentum in project awards for FY25.
However, the shift towards Build-Operate-Transfer (BOT)-Toll projects is unlikely in the near to medium term due to higher equity commitment and traffic risks. ICRA projects the BOT-Toll awards’ share to increase to around 10 percent in FY25.
The competitive landscape in the Engineering, Procurement, and Construction (EPC) and Hybrid Annuity Model (HAM) project bidding process remained intense in FY24, with consistently discounted bids compared to authority’s base price since FY21.
