ICRA expects government to drive capex cycle through roads, railways, and defence

In its first budget this July, the new government is expected to accelerate its focus on capital expenditure and infrastructure development.


Leading ratings agencies ICRA and Moody's recently hosted a seminar to discuss key areas requiring more policy and resource attention, including renewables, roads, ports, and airports.

Girishkumar Kadam, Senior Vice President and Group Head-Corporate Ratings at ICRA pointed out to CNBC-TV18 that the budgetary allocation towards the road sector by the ministry has gone up by more than eight times over the last 10 years to touch about ₹2.7 lakh crore this year.

"With that background, we expect the road execution to move up by around 8% to touch about 13,000 kilometre this year – thanks to healthy project pipeline which is there for the sector,” he said.

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Abhishek Tyagi, VP of Project and Infra Finance at Moody’s Ratings discussed the positives for the power sector such as shortening receivable cycles for companies and timely payments of subsidies over the last two years.

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“The government of India has been driving the capex cycle through a good amount of allocations on roads, on railways and on defence, which is crowding out the private sector investments,” K Ravichandran, Chief Ratings Officer at ICRA Limited said.

Private capex, he believes, will pick up over the medium-term, especially in sectors like oil and gas, metals and mining, airlines, hotels, healthcare etc.

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Product-linked incentives (PLI) driven investments are also forthcoming in segments like electronics, semiconductors, textiles, solar modules and so on and so forth, he said.

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