Cost Escalation on Infrastructure Projects in India

Introduction

India is aiming to become a $5 trillion economy by the year 2024 and one of the key sectors which act as a stimulus for this growth is the infrastructure sector. Therefore, India plans to spend $1.4 trillion during the period 2019-2023 to achieve the $5-trillion economy goal.

The project implementation status report of central sector projects prepared by Infrastructure and Project Monitoring Division, Ministry of Statistics and Programme Implementation, Government of India during the 1st quarter of 2021-2022 (April-June) shows that central sector projects costing INR 150 crore & above has incurred approx. 20% cost overrun in their approved project cost. This is a significant finding and if this trend continues in the coming years as well, it will result in fiscal losses and will certainly derail India\’s goal of becoming a $5 trillion economy by 2024.

This case study tries to find out the root causes of the cost escalation in central infrastructure projects in India and provide possible suggestions to overcome such challenges.

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