India Infrastructure Investments to Reach Rs 23–24 Lakh Cr With 50% Growth: Crisil

Investments across India’s key infrastructure sectors are expected to grow 45–50 per cent over the current and next financial year to reach around Rs 23–24 lakh crore, according to Crisil Ratings. The growth is being driven by strong policy support and sustained domestic demand, even amid global uncertainties and geopolitical challenges.

The infrastructure growth story is expanding beyond traditional sectors, with increasing focus on clean energy diversification such as renewables and logistical improvements in roads, alongside emerging areas like data centres, smart meters, green hydrogen and battery storage. This broad-based investment cycle is also expected to support real estate growth, leading to healthy absorption in commercial office spaces and steady demand in the residential segment.

However, certain challenges persist, including delayed offtake and transmission constraints in the renewable sector, a slowdown in road project awarding, rising capital values in residential real estate and reduced demand for commercial spaces from the IT sector. Despite these headwinds, continued government support and strong balance sheets of infrastructure players are expected to sustain the sector’s growth momentum.

Krishnan Sitaraman, Chief Ratings Officer, Crisil Ratings, said, “The key infrastructure sectors—renewables, roads, real estate and the new-age ones—account for around half of India's total infrastructure investments and provide strong support to India’s GDP growth trajectory. While largely insulated from the direct impact of the West Asia conflict, they do face indirect inflationary pressure if the conflict prolongs. Nevertheless, investment growth is likely to remain strong at 45-50% over the current and next fiscals—akin to the growth seen in the preceding two fiscals. Consequently, investments in these sectors should rise to ~Rs 23-24 lakh crore, benefiting from strong government policy support and domestic demand.”

Renewable energy capacities, the first pillar in the infrastructure growth story, are tracking their clean energy targets for 2030 and may see addition of 50-55 giga-watt (GW) annually over the current and next fiscals, surpassing the previous high of 50 GW logged last fiscal. This will be on the back of a robust project pipeline and policy push for round-the-clock solutions (with battery storage capacity targeted to scale up to 208 giga-watt hour by 20301). Fuelling this further is rising adoption of rooftop solar under PM Surya Ghar Yojana and favourable open access policies for commercial and industrial projects.

This massive growth in power capacities finds a strong anchor in India’s tryst with data and decarbonisation. Data centre capacity2 is seen increasing 35-40% annually through fiscal 2028, fuelled by increasing artificial intelligence (AI) and cloud adoption. Also, need for decarbonisation across industrial sectors and the ongoing geopolitical tensions impacting the natural gas markets can potentially catalyse the policy environment around green hydrogen.

A gradual revival is expected in project awarding in the road sector, the second critical pillar, post slowdown of the last few years. This will be led by healthy budgetary allocation as well as efforts taken by the government to debottleneck the approval processes. Interestingly, asset monetisation is expected to gain further momentum, with Rs 70,000-80,000 crore worth of assets estimated to be monetised by the National Highways Authority of India to fund the growth.

The real estate sector, the third critical pillar, is experiencing a divergent trend across segments. Residential demand growth is expected to remain flattish for the current and next fiscal amid elevated capital values, though on a high base established by above average growth of past few years. The commercial office segment is bucking this trend, driven by continued healthy leasing demand (6-7% growth in the current and next fiscal), fuelled by flexible workspaces, Banking, financial services, and insurance (BFSI) sector and global capability centres (GCCs), leading to declining vacancy levels.

While these sectors are expected to see significant investment, there may be some challenges for the developers too.

In the renewable energy sector, transmission capacities are yet to match the pace of renewables rollout, while offtake arrangements for nearly half of previously awarded projects remain untied.

Similarly, in the roads sector, a prolonged slowdown in awarding activity may affect the order books and growth momentum of developers. This could drive them to take new risks as they diversify into other sectors.

The real estate sector may also experience challenges, with residential inventories on the rise over the current and next fiscals. Similarly, the commercial real estate office segment may be impacted by AI related disruptions and the global economic slowdown, which could dampen leasing activities, particularly by the IT sector.

Among new-age sectors, the growth of data centres is exposed to pricing risks due to a rise in competitive intensity. Smart meters may face execution delays due to right-of-way issues and lower-than-anticipated consumer acceptance. Battery manufacturing and green hydrogen sectors remain exposed to competition from imports or alternative solutions.

Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings, said, “Despite challenges, most of the players in the established sectors are well-positioned to overcome them, given their strong track records and execution capabilities. Their healthy credit profiles, on the back of stable cash flows, strong operating performance and prudent leveraging, provide support. Around 15-20% of investments in these sectors will be funded through equity. New-age sectors with mature business models will benefit from easier access to capital, while nascent ones may require higher upfront equity investments.”

And to top, their credit profile will remain resilient. For the renewable energy sector, though the debt levels are likely to increase due to substantial capacity additions, a commensurate increase in operating cash flows will keep credit metrics comfortable. Meanwhile, road and residential real estate developers are likely to exhibit healthy credit metrics, driven by past deleveraging efforts and steady operating performance. Commercial real estate office players will also demonstrate stable credit profiles, characterised by healthy operating performance and prudent leveraging by the players.

Among new-age sectors, data centres and smart meters exhibit greater bankability due to their relatively more mature business models and higher track records, while battery manufacturing and green hydrogen will require policy support given the relatively early stage of their evolution.

All said, timely project execution will be crucial amid geopolitical uncertainties, and continued prudent leveraging by the players will bear watching.