In recent years, India’s road sector has witnessed significant progress, driven by a strong emphasis on enhancing connectivity through the construction of vital bridges and tunnels. This growth has been further supported by the adoption of advanced technologies, the use of sustainable construction materials and a concerted effort to improve road safety standards. Notably, India is emerging ahead of many developing countries in integrating cutting-edge innovations and high quality materials into its road projects.
This trend signifies a strategic shift in the country’s approach, where future road infrastructure is envisioned not only to bridge connectivity gaps but also to ensure sustainability and security. Such infrastructure will be characterised by the implementation of innovative solutions, adherence to technical standards and compliance with established engineering protocols, setting new benchmarks for quality and resilience.
Highway awarding and construction trends
Project awarding deviated from its usual accelerated path in 2024-25 due to procedural delays in project cost approvals, restrictions related to the election code of conduct and transition issues associated with the ministry’s adoption of the build-operate-transfer (BOT) toll model. Going forward, the target is to award projects worth Rs 10 trillion every year.
Further, in recent months, industry analysis has indicated an uptick in the cancellation of high-value tenders due to delays in obtaining clearances. However, awarding activity is expected to improve in the second half of 2025-26, driven by recent directives related to pre-construction activities and the National Highways Authority of India’s (NHAI) project pipeline worth Rs 3.45 trillion.
In 2024-25, an extended election process and delays in obtaining clearances hampered execution. In 2023-24, the sector witnessed rapid construction owing to substantial project awards in 2022-23. The pace of construction reached 37 km per day in 2020-21, driven by strong awards in FY 2018 (over 17,000 km). As per industry projections, national highway construction in FY 2026 could be the lowest in six years. NHAI has identified 124 national highways with a total length of 6,376 km to be awarded in 2025-26 at an estimated cost of Rs 3.45 trillion.
In recent years, the hybrid annuity model (HAM) and the engineering, procurement and construction (EPC) model have been the primary modes of road project awards. Under NHAI awards, HAM is expected to remain dominant. With the centre’s renewed interest in the BOT toll model, a long-term shift in project awarding trends can be expected, with the share of BOT gradually increasing from negligible. In line with this, NHAI plans to award 12 projects under BOT toll in 2025-26.
Unlocking value through asset monetisation
The National Monetisation Pipeline (NMP) remains a cornerstone of the government’s efforts to unlock value from existing infrastructure. Leveraging this framework, NHAI has monetised operational road assets to generate revenue, reduce debt and reinvest in newer projects. The road sector has emerged as a front runner in the monetisation of infrastructure assets by the government under the NMP.
Under NMP-I, the government had set a monetisation target of Rs 6 trillion across sectors for the period FY 2022 to FY 2025, with roads accounting for over 26 per cent of the target at Rs 1.6 trillion. NHAI achieved around 74 per cent of this target by mobilising approximately Rs 1.18 trillion during the targeted period. However, the total monetisation achieved by the authority since FY 2019 stands at only Rs 1.4 trillion.
The monetisation target for 2025-26 stands at Rs 300 billion. According to ICRA, timely asset monetisation could enable the government to surpass this target, potentially achieving between Rs 350 billion and Rs 400 billion. Recently, the government announced the second phase of the NMP (NMP-II), under which the road sector accounts for 35 per cent of the overall monetisation target of Rs 10 trillion. Under this phase, the target for monetising highway assets has more than doubled compared to the first phase (NMP-I), with a projected value of Rs 3.5 trillion to be mobilised between FY 2026 and FY 2030. This expansion reflects the government’s intensified focus on leveraging highway asset monetisation as a key financing mechanism for infrastructure development.
Robust lending continues
Lending activity in the sector has gained momentum over the years, supported by sizeable infrastructure loan books due to the government’s continuous focus on infrastructure. Gross bank credit to the sector has grown consistently, albeit at a modest pace, recording a CAGR of close to 14 per cent during 2020-24. In July 2025, gross bank credit registered marginal growth, rising to Rs 3,162.6 billion, a 1.6 per cent increase over the March 2025 level.
However, during 2024-25, there was a marginal decline due to NHAI’s substantial debt repayment, amounting to Rs 906.34 billion, of which Rs 361.45 billion was bank credit. A slowdown in project awards and execution further impacted fresh credit uptake. Effective October 2025, the Reserve Bank of India’s revised project finance guidelines mandate 1 per cent provisioning of loan value during construction and 0.4 per cent during the operational phase. While it may raise credit costs, it is not expected to have a significant impact on lending.
The government is also planning to set up a Rs 200 billion credit risk guarantee fund to cover policy and non-commercial risks, with the aim of increasing credit flow to infrastructure projects, including roads.
Progress in rural areas
The Pradhan Mantri Gram Sadak Yojana (PMGSY), the centre’s flagship road construction programme, is a testament to the country’s commitment to rural development. The scheme has progressed through multiple phases, each designed to address specific challenges and enhance the overall effectiveness of rural roads. As of August 2025, 191,282 rural roads covering 838,611 km and 12,146 bridges have been sanctioned. Of this, around 183,215 roads covering 783,727 km and 9,891 bridges have been completed so far. The completion timeline for PMGSY I, II and III was March 2025. However, many states have requested for extensions.
Stepping stones towards sustainability
A transition towards more sustainable construction practices is now under way. The ministry has mandated the use of waste material in hot mix bituminous wearing courses or top layers for service and slip roads along highways. It also issued a circular mandating the use of precast concrete components for non-critical components in highway projects costing more than Rs 3 billion. Further, guidelines have been issued to promote the use of urban solid waste and inert materials in national highway construction.
In addition, advanced technologies are set to transform the road sector. Artificial intelligence (AI), machine learning (ML), drones, ANPR cameras and other digital tools for construction, operations and maintenance (O&M), tolling systems and passenger safety are expected to gain greater prominence.
Fly ash, slag, construction and demolition waste, plastic waste, crumb rubber modified bitumen, geosynthetics, etc. are now increasingly being used across national highway projects. Praj Industries has unveiled India’s first national highway constructed using lignin-based bio-bitumen. NHAI’s 135 km long six-lane Eastern Peripheral Expressway used 12 million cubic metres of fly ash in its construction. Meanwhile, the Noida-Greater Noida Expressway is expected to incorporate solar-powered reflectors.
In terms of other ongoing initiatives, Bihar plans to leverage AI- and ML-driven asset management for pothole-free roads and bridge safety. Meanwhile, the Greater Visakhapatnam Municipal Corporation has launched SARTHI, an AI-based traffic management pilot. Further, MoRTH has approved Uttar Pradesh’s first AI-based road safety pilot project to reduce accidents and improve enforcement efficiency.
Paving the road to resilience
To conclude, the sector has made tremendous progress over the past decade, driven by visionary initiatives and sustained government impetus. Yet, much remains to be done to build a truly world-class highway network. Achieving the Viksit Bharat 2047 vision will require a stable and forward-looking policy framework. The past year has already signalled such a shift, with a renewed focus on quality construction and policy measures aimed at enabling robust future growth. Digitalisation is a key trend that will shape the future of the road sector. Key developments include the adoption of digital tools and technologies for O&M, the rise of connected and autonomous vehicles and advancements in road safety and construction technologies. These shifts will help the sector maintain its operational efficiency in the future.
Harman Mangat and Bhavya Bhandari
