In recent times, Indian infrastructure development is scaling greater height. In India, this industry is not only limited to construction roads, but also encompasses railways, water supply, airways, telecommunication, gas and many more. Reports show that in year 2012, Indian infrastructure market was a bit sluggish, marking a poor macroeconomic forces and political instability. The main areas of concern are land acquisition and clearance of environment. With a total share of 2 percent, in year 2011- 12, the construction industry has estimated 670,778 crore to the national GDP (Samuel, 2010).
Further, poor enforced contract, ineffective monitoring and high cost of input are some of the major factors that are hindering the growth of this sector; however, there are some area that has witnesses a high growth. In civil aviation and power sectors, an approval of 49% of foreign approval has been given by Indian Government. Currently India is gambling on house for private investment infrastructure. It is expected that between years 2012-2017, the government is hoping that through public and private partnership, private sector will invest near about $350-400 billions in various infrastructural sectors. This, according to 12th Five year plan, this will amount to the half of total investment in infrastructure. Indian infrastructures are targeted as one of the top most decision maker in infrastructural sector (Chavez, Ramaswami and Kumar, 2012).
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BACKGROUND OF INDUSTRY
The Indian infrastructure industry is one of the earliest phases of investment that is being used by the industrialist and even the Indian government is paving a huge attention for the way to cater a greater private participation of people in this sector (Rud, 2012). Since ages, India is proved to be emerging markets in the world. Availability of skilled labor and technical manpower is the assets. The availability of such manpower in India is huge. Road Transport in India has been declared as the priority and has an access for favorable loans. In order to encourage infrastructural industry in road sector, the monopoly and restrictive trade act was passed by the government. All necessary requirement needed in the development of road sector were provided by this sector (Sharma and Sehgal, 2010).
Further, the national highway act was passed by the government, which was aimed to provide help for the modification and reduction on all national and international motorways, bridges and tunnels. Howrah Bridge in Calcutta is the biggest example here. This bridge is one of the busiest bridges in world, where daily there is a flow of about 57,000 vehicles. In addition to this, for a reduction in import duties, private participation in energy sector is always encouraged (Gupta, 2010). There is five year tax redemption for energy projects and 16 percent of return on equity is been provided.
There are many new infrastructural policies being implemented by the government which aims to improve the quality that matches with the worldwide standards and by the result of which India could emerges as one of the major producer, importer, and exporter of all infrastructural products. There are many advantageous policies been implemented and analyzed to encourage both foreign and private participation (Kamel, 2006). In very early days, after the independence, there were many new big tickets invested by the Indian government in the infrastructure sector with a motive that could stand out of dignity and can serve as a base for industrialization. Some of the very prominent in these sectors were Bhakra Dam, Howrah Bridge, Hirakund Dam, Tarapore, etc (Percoco, 2012).
According to a survey conducted the entire span of Roadways in India counts around 44 lakh. Globally, Indian houses are one of the most expensive roadway networks. Currently, the National Highway in India has represented a down by 2% in the overall transportation network across the country. The railways network span in the country is approximately 64,000 km. The railways transport more than 11 millions of computers and near about 11 lakh tonnes on a day to day basis (Strand, 2010).
PESTEL ANALYSIS OF INDIAN INFRASTRUCTURAL INDUSTRY
PESTLE analysis stands for political, economic, social, technological, environmental, and legal analysis that aims to identify all the external factors that are in or against the favor. It is a process which is often depicted in a standard format and helps to understand all the external and market environment for a specific and relevant industry or sector. Often, it is used as an integral part of strategic analysis. It allows an organization to have an indebt study of all strength and weakness prevailing in the market and helps management to define all the dangerous area that creating an obstacle in their growth and development (Jethi, and Sethi, 2007).
- Political Analysis: From about last one and half years, Indian Infrastructural sectors is battling with very unpleasant orders, broken cash cycles high leverage debt. Support through grants, subsidy, cash funding, and tax support is always provided to the companies in this sector (PEST Analysis of Construction Industry, 2012).
- Economic Analysis: In last few years, India is reeling with a very low GDP growth .The main reason behind this growth is improper infrastructure. Due to an increase in the prices of cement, iron, etc the infrastructural industry is hugely infected. As the prices increased, the people stop working and wait for the time when the price will again fall. Further, with the impact foreign regime in India, there is always a change required in the sector, which lead to decline in the sector. In addition to this, the road structure in the country is very poor. Road connecting to the interior rural segment are undeveloped which leads to broken products at the end (Morris and Shejhar, 2002.).
- Social Analysis: In India, this sector has proved as one of the biggest sector providing employment opportunities to people. Labor class society is especially at the boom. By getting work on daily basis, they are able to fulfill their daily needs. In addition to this, by providing employment opportunities, the sector aims to improve living standard of lower class society.
- Technological Analysis: Technologies often keep on changing. Advancement in these technologies including computer advancement, technology transfer in India is rapidly used by the companies. Technology transfer and investment in infrastructure has become much more important as these directly serve as a path to become sustainable when compared to other countries. In construction, with the help of advanced technology, a blend of traditional touch is provided in India.
- Environmental Analysis: Well designed infrastructure always has a positive impact on the environment, which at the end leads to the development. However, in India, the degradation by various infrastructure industries has largely impacted the environment. Fossil fuel and road transportation is badly impacting the environment. In recent years heavy investments are done by the Indian government to stop this environmental degradation (Samanta and Ashok, 2005).
- Legal Analysis: One of the major issue the all private infrastructure payers faces in India has to compete with legal frameworks. There are number of laws implement by the state laws and some by local authorities. With respect to infrastructure, each state has their individual formulated legislations.
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FIVE FORCES MODEL
Five force Model was developed by Michael E. Portal aims to identify and analyze five competitive forces that can shape any of the industry by determining the strength and weakness. Five forces identified for the Indian Infrastructural industry are as follow:
- Buyer Power: There are many buyers available in infrastructure industry. Some of the main buyers that exist in Indian infrastructure industry are government agencies and customers of private sector. Generally, in Indian infrastructural industry major market players are invited by customers, who buy tenders on terms and condition of customers. This indicated that in this sector major power is of buyers who are in more powerful position and they are the one who decides for the parameter of business to be conducted. Indian government has recently invested over $1trillion for next five years in infrastructure. In addition to this, the buyers in this market are influences by all the economic factors. In private sector, the buyers have a very little brand loyalty which causes a negligence impact on the industry (Neeraj, and Jah, 2012).
- Suppliers Power: The supplier power of Indian infrastructure is accessed to be moderate. Generally, there are two types of suppliers present in this industry. The first one is one who distributes material for services, and the second one is who provide service to complete any project. In India, the materials required for buildings are consolidate with some of the major player such as Cemex and Holcim. However, all the suppliers have to compete for the prices to get any contract. In addition, the rise in the prices of raw material has a negative effect on the suppliers (Arasu, 2008).
- New Entrants: A strong growth has been witnessed in India over the last few years. There are many foreign companies that are joining hands with India. These new emerging companies in India are largely impacting the growth of infrastructural market in India. These entrants are now lending equipment from India and further, hiring workers on temporary basis rather than incurring a fixed cost on all. Act of new foreign industries entering in India can impact the growth of infrastructural sector at a large (Miller, 2000).
- Threat of substitutes: In infrastructural industry availability of substitutes are negligible because this is a basic industry and is required for the development of other industries.
- Competitors: The infrastructural industry in India is largely fragmented. Governments across the world are investing money to develop their own infrastructure plan. Recently many foreign countries have invested in India with an aim to increase their own profit and are giving tough competition to the Indian companies. Beside this, there are many infrastructural companies that are being influenced by the foreign tradition and trying to bring changes in their own working pattern (Sreenivas, 2006).
In reference of the above conducted study, it can be concluded that in present time there are many challenges being faced by Indian infrastructural industry. This sector is finding very hard to raise its equity to run the business. Today, India is in requirement for quality infrastructural facilities. Further, it was identified that this sector is mostly labor incentive and is providing job opportunities to many lower class families. In addition to this, there are many acts passed by government that encourage this sector and leads to a sustainable development of Indian economy.
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Book, Articles, and Journals
- Arasu, V.G., 2008. Globalization And Infrastructural Development In India. Atlantic Publishers & Dist.
- Chavez, A., Ramaswami, A., Nath, D., Guru, R. and Kumar, E., 2012. Implementing Trans-Boundary Infrastructure-Based Greenhouse Gas Accounting for Delhi, India. Journal of Industrial Ecology. 16. pp.814–828.
- Gupta, A.G., 2010. Monetary, Investment, and Trade Issues in India. Indian Growth and Development Review. 3(2). pp.209 – 213.
- Jethi, N.K. and Sethi, V., 2007. Infrastructure development in India: post-liberalisation initiatives and challenges. Journal of Infrastructure Development.
- Kamel, S., 2006. Electronic Business In Developing Countries:Opportunities And Challenges. Idea Group Inc.