Foreign investments in Indian infrastructure
And as the second highest contributor to India’s national GDP, the construction industry receives large influxes of foreign investment in infrastructure, real estate, etc. The construction sector in India has received about $25.7 billion in direct foreign investments alone between the years of 2000 - 2020.
The industry is rapidly growing, not only in terms of development of housing, roadways, bridges, healthcare and educational infrastructure but also in terms of the sheer volume of people it has employed. (The construction industry is the second largest employer in India.) As a result of this expansion and growth, we are predicted to become the world’s 3rd largest construction market by 2025. FDIs play a vital role in this expansion, since India provides several projects that foreign investors can choose to invest in, like transport infrastructure, educational infrastructure, construction of green buildings and sustainable architecture, commercial and residential buildings and so on.
Before we talk about foreign direct investments (FDI) that are instrumental in setting up India’s infrastructure, let’s have a look at the FDI policies. This gives us a better understanding of the current state of foreign investment opportunities for India.
As of now, the government has allowed 100
% direct foreign investment in the following sectors and spaces for construction and infrastructure:
A lot of the restrictions on FDIs were relaxed by the government in the recent past to facilitate and maintain growth in the construction industry. In fact, proposals are being made to allow limited liability partnerships (LLPs) so that foreign entities are more attracted to investing in the construction of infrastructure in India such as roads, townships, hotels, hospitals, smart cities etc. Having LLPs in place also means that it will be easier for sectors to receive foreign investments, instead of being held back because of the current investing conditions. This relaxation in policies also makes it feasible for the central government to reach its goal of building 100 smart cities and constructing affordable housing for urban areas by 2022.
One such project is the NIP (National Infrastructure Pipeline) which is a massive effort to create a “masterlist of infrastructures” all over India since its commencement in 2019. It aims to be finished by 2024, by which the project boasts of delivering world class infrastructure to the citizens, improving the quality of life and also attracting foreign investment capital. A gigantic amount of groundwork has gone into gathering data about infrastructure sub-sectors to determine where exactly a need for development and growth is needed. The NIP will cover a range of projects worthy of foreign investment, such as water and sanitation, commercial and social infrastructure, transport, energy, communication, logistics etc. This is incredibly helpful as foreign investors can comb through and investigate the numerous projects that need investment and choose an apt project that fits their requirements the best, making it all the more easy for larger investments in infrastructure in India.