India's road construction slows even as government looks to increase target to14,000 kilometres from 12,500 kilometres

The National Highway Authority of India (NHAI) has awarded three projects spanning 87 kilometres in June 2023, after a two-month pause. This is significantly lower than the 303 kilometres of projects awarded during the same period last year, an analysis by Nuvama Institutional Equities reveals.

The slowdown in the economy, procurement delays, land acquisition issues and environmental clearances are some of the reasons facing the road construction industry, the industry analysts pointed out.

The slowdown in NHAI's awarding activity comes as the government is looking to increase its road construction target to 14,000 kilometres from 12,500 kilometres at a pace of 38 kilometres per day.

In June 2023, the NHAI constructed 262 kilometres of roads, compared to 326 kilometres in June 2022 and 413 kilometres in May 2023. Year to date FY24 road construction stands at 844 kilometres, compared to 863 kilometres in the same period last year. In FY23, the NHAI constructed 4,500–4,600 kilometres of roads, versus 4,325 kilometres in FY22, at a pace of 12.5 kilometres per day.

The reasons for the slowdown vary. While commodity prices have softened, high competition remains an issue, with knock-on effects on margins. However, a 25 percent higher YoY budgetary outlay for the current fiscal year, the Reserve Bank of India's (RBI) pause in interest rate hikes, the government's thrust on roads, and the improvement in credit availability from banks are encouraging factors.