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The irrigation sector has witnessed good traction over the last one year and is likely to see improved execution with increased funding support from the state and the Central Governments' budgetary allocation and the Long Term Irrigation Fund (LTIF) of Nabard, according to rating agency ICRA.
The corpus of this Nabard fund was increased to Rs 40,000 crore in the Union Budget 2017-18.
The construction sector's gross value added witnessed year-on-year growth of 2.7 per cent during the third quarter of 2016-2017, which is similar to the modest growth witnessed in the past quarters.
The growth in construction despite demonetisation reflects the resilience of the organised construction sector.
With the Budget's continued thrust on infrastructure, increase in allocation towards the infrastructure sector, and focus on major schemes towards infrastructure development and higher execution targets for the major infrastructure segments, will be positive.
A major push from the Government on roads and urban infrastructure segments has helped construction companies improve their order book positions.
According to K. Ravichandran, Senior Vice-President and Group-Head, Corporate Ratings, ICRA: “ICRA’s sample of construction companies witnessed an improvement in order inflows, with a major push coming from segments such as roads, metro rail, and urban infrastructure. Their current order book stood at over three times their last reported annual revenues which will support growth in the near term.”
The focus is currently on the 99 projects selected under the Accelerated Irrigation Benefit Programme, which are targeted for completion in stages by December 2019.
Telangana and Andhra Pradesh have significantly increased allocation towards the irrigation sector, adding to the order flow of construction companies.
The pace of recovery in the overall construction sector is likely to be modest and will be linked to the on-the-ground impact of the policy measures and availability of funds for project development.
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