Asia Insights
Key Highlights:
- Infrastructure development has been an important contributor to India’s growth path, and continues to be a priority within government policy
- Continued modernisation is improving efficiencies across the economy and changing the business environment for incumbents and start-ups
- Listed infrastructure equities have been particular beneficiaries over recent years, significantly outperforming the broader market and highlighting the benefits of an active approach amidst an evolving economy
Infrastructure’s role in India’s economic transformation
India’s infrastructure development is central to its target of transforming into a USD30tn developed economy by 2047. The government launched the National Infrastructure Pipeline in 2019 with a vision to invest USD1.5tn over five years by 2025. This initiative currently supports over 9,000 projects with public-private partnerships contributing. The scale of infrastructure improvements underway is stimulating the country’s broad economic expansion and should improve living standards.
In recent years it has resulted in outsized returns for listed infrastructure equities and property. While growth prospects are contributing to higher valuations for the infrastructure sector, India’s modernisation has lifted entry barriers for businesses, resulting in intensifying competition. This creates potential for further performance dispersion across companies and sectors.
Modernising infrastructure to drive efficiencies and opportunities
The government’s ambitions include: cutting logistics costs by 50 per cent by 2028, through major investment supporting all modes of transport; modernising the energy grid to increase the share of renewables and support growing urban populations; building the cities of tomorrow through a major new house-construction programme and upgrading urban transport infrastructure; ensuring universal access to clean water; and improving waste-management systems across cities.
Implications
Rapid development and growth are supporting higher valuations. We explore the implications from improved infrastructure enabling broader access across the economy, including increased competition due to the lifting of entry barriers - suggesting opportunities for an active approach in the world’s fastest-growing major economy.