India’s infrastructure landscape is evolving dynamically, with investment patterns shifting to accommodate emerging sectors alongside traditional ones. Historically, the majority of the capital was predominantly directed towards conventional infrastructure sectors such as energy, roads, airports, railways and urban rail. This is exemplified by the National Infrastructure Pipeline programme, which outlines substantial investments in these core sectors over a period of five years.
However, in recent years, the infrastructure landscape has expanded beyond these traditional domains, with the emergence of new, technology-driven subsectors such as data centres, electric vehicles (EVs), desalination and green hydrogen, which are now fostering considerable investor attention and funding.
EV uptick
India’s EV sector is poised for significant growth, driven by ambitious national targets and environmental imperatives. This transition aligns with global trends towards sustainable transportation and positions India as a potential leader in the EV market. The country has set an ambitious target of increasing the share of EV sales to 30 per cent in private cars, 70 per cent in commercial vehicles, 40 per cent in buses, and 80 per cent in two- and three-wheelers by 2030. Additionally, as per media reports, the country is set to attract foreign investments of about $20 billion by 2030 in this space.
The sector is experiencing a surge in foreign investments, with domestic players attracting significant capital. UK-based energy giant BP has invested in EV fleet aggregator BluSmart and electric mobility start-up Magenta Mobility. The growing investment trend extends beyond start-ups, as legacy automotive companies have also secured foreign funding. For instance, British International Investment recently committed $250 million to Mahindra & Mahindra’s four-wheeler EV division. Moreover, Pure EV, a Hyderabad-based EV manufacturer, raised around $8 million to expand its sales from 140 to 300 dealers in the next six months; BluSmart raised around $24 million to expand operations; and Perpetuity Capital, an EV financing start-up, raised Rs 70 million via non-convertible debentures from N+1 Capital and RevX Capital.
In the two-wheeler EV market, companies such as Ola Electric Mobility, Ather Energy and Ampere Vehicles have established strong positions. The ecosystem is further supported by start-ups focusing on battery swapping and charging infrastructure, having secured substantial funding, such as Battery Smart ($65 million), ElectricPe ($8.29 million), Turno ($ 6 million) and Metastable Materials (undisclosed). This investor interest is expected to mature the EV space by enhancing infrastructure and services, ensuring the long-term sustainability of EV adoption.
While India lags behind other countries in EV adoption and manufacturing, in February 2023, the Geological Survey of India discovered an inferred 5.9 million tonnes of lithium in the Salal-Haimana areas of Reasi district, Jammu & Kashmir, under the G3 stage mineral exploration project. This discovery holds great promise, as lithium is a crucial component for EV batteries and could substantially support the country’s goal to increase EV penetration to 30 per cent by 2030. Further, it may reduce import dependence and address supply chain issues.
Desalination
Given the restrictions on water extraction in some regions of the country, industries are exploring alternative means. For this, many industrial desalination plants are being set up in the country. A variety of funding sources are being tapped into in order to execute these projects, ranging from central and state government funding to public-private partnerships and loans from multilateral agencies.
The sector is steadily advancing, with significant potential to expand its footprint in the industrial segment. As per India Infrastructure Research, more than 370 million litres per day of capacity is expected to be added by 2025 with a tentative investment of around Rs 40 billion. This capacity is expected to be established in key coastal states/union territories — Tamil Nadu, Andhra Pradesh, Gujarat, Maharashtra, Odisha, Karnataka and the Lakshadweep islands. Ports and oil refineries are expected to monetise this growth with new projects.
In a significant development, as of January 2024, the Department of Industries in Chennai plans to build additional desalination plants and treat grey water to meet excess water demand, for which it has attracted investments worth Rs 6.6 trillion.
Data centres
Data centres are the unseen backbone of modern digital life, powering everything from everyday mobile banking and social media interactions to cutting-edge artificial intelligence applications and immersive gaming experiences. This asset class is an amalgamation of real estate, infrastructure and technology, although with highly specialised specifications. Customer stickiness is extremely high in the data centre asset class, not just on price but also on several critical technical criteria. This is because it is not easy to migrate servers between data centres, and customers would rather scale within the same data centre. This leads to lower risk for investors. With its downside protection and low risk, the data centre asset class allows diversification for investors, making it an attractive investment alternative.
According to a report by CBRE India, the country’s data centre industry witnessed investment commitments worth $21 billion during the first half (H1) of 2023. Overall, between 2018 and H1 2023, the sector attracted investment commitments of about $35 billion by both global and domestic investors. Hyperscale players dominated the majority of these investments with a share of about 89 per cent, while co-location providers contributed to the remaining 11 per cent. The top states that dominated the cumulative investment commitments were Maharashtra, Tamil Nadu, West Bengal and Uttar Pradesh.
During H1 2023, Amazon Web Services committed $12.7 billion towards the data centre segment in India. Meanwhile, STT Global Data Centres India and Sify Technologies Limited announced investments worth $1 billion and $365 million respectively. NTT Limited committed $300 million in Tamil Nadu and $242 million in West Bengal, while CapitaLand Investment Limited committed $162 million in Maharashtra.
Green hydrogen
In a strategic move to redefine its energy landscape and establish global dominance, India is aggressively positioning itself in the green hydrogen sector, aiming to become a leading exporter by 2030. Significant investments are necessary to meet both existing and future energy demand.
The sector has been receiving the majority of investments in the form of sanctions and loans. In June 2023, the World Bank approved a $1.5 billion loan to help India accelerate its low-carbon energy development, focusing on promoting green hydrogen markets, electrolyser production and renewable energy integration. This initiative aligns with India’s ambitious energy transition goals, including achieving 500 GW of installed renewable energy capacity by 2030 and attaining net zero emissions by 2070.
In the following month, the Kerala state government received investment proposals totalling Rs 727.6 billion from four large companies (undisclosed) for establishing green hydrogen and green ammonia projects based on the state’s draft green hydrogen policy.
The government has also launched the Rs 170 billion National Green Hydrogen Mission to foster electrolyser manufacturing and green hydrogen production. Complementing these efforts, India is currently developing an innovative policy framework, wherein the government will aggregate demand from diverse sectors and auction it with a price support commitment. The implementation of such a large-scale, long-term public procurement initiative is expected to catalyse private investment and offtake, driven by firm and sustained demand visibility. This strategy is anticipated to create a virtuous cycle of investments, leading to scale-up and cost reductions. Consequently, green hydrogen and ammonia are projected to become increasingly competitive, generating further demand.
Furthermore, in the upcoming official Union budget announcement, the centre may announce policy-related measures, viability gap funding and incentive schemes for the green hydrogen and the battery storage space.
In sum
Over the years, in line with global trends and the shift towards sustainability and technologically advanced infrastructure, non-conventional infrastructure sectors have garnered significant investor interest, positioning them well for future advancement. For instance, data centres have seen substantial growth due to increasing digitalisation and cloud computing demand; policies such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles II scheme and the production-linked incentive scheme have boosted investor interest in the EV space; green hydrogen has emerged as a promising clean energy solution; and desalination plants are gaining traction as a viable solution to water scarcity.
In order to guarantee sector growth and expansion, financial collaborations will play a crucial role. In the future, government grants, international loans, private equity investments and innovative financing models will remain essential for overcoming initial challenges, scaling up projects and accelerating the adoption of new technologies for the upcoming sectors.
Harman Mangat
