ICRA Forecasts India's Road Construction to Hit a Five-Year Low in FY26

Rating agency ICRA has forecast a slowdown in India’s road construction activity, projecting the Ministry of Road Transport and Highways (MoRTH) to execute 9,000–9,500 km in FY2026e. This translates to a pace of 25–26 km per day, the lowest daily execution rate in the past five years.

The revised estimate, marginally lower than the earlier projection of 9,500–10,000 km, reflects expectations of weaker execution this year due to extended monsoons and a decline in project awarding over the last two fiscal years (FY2024 and FY2025).

This anticipated slowdown follows a 14% year-on-year drop, where execution fell to 10,660 km in FY2025 from 12,349 km in FY2024. Concurrently, project awarding by MoRTH in FY2025 is estimated to be flat year-on-year at 8,000-8,500 km, a figure significantly lower than the awards seen between FY2021 and FY2023. ICRA anticipates a pickup in awards to 9,000-9,500 km in FY2026, supported by an expected improvement in the latter half of the year following a recent ministry directive. This directive mandates that projects can only be awarded after securing 90% right-of-way, forest clearances, and necessary General Agreement Drawing (GAD) approvals for bridges.

Describing the recent tightening of bidding norms for Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) projects as a welcome step, ICRA notes that competitive intensity is unlikely to ease materially in the near term. Given the declining order book for contractors, a meaningful and sustained pickup in order awarding activity from the Ministry remains vital to ease competitive pressure and support sector profitability.

On the revenue front, toll collections are projected to grow by 5-8% in FY2026, driven by a combination of 3-4% traffic growth and annual toll rate increases of 2.3-4.0%. In a significant push for asset monetisation, the National Highways Authority of India (NHAI) could potentially garner Rs. 35,000-40,000 crores in FY2026 through Toll-Operate-Transfer (TOT) bundles and its Infrastructure Investment Trust (InvIT). This would bring the NHAI’s cumulative monetisation since inception to around Rs. 1.3 lakh crore, achieving 81% of the National Monetisation Pipeline target of Rs. 1.6 lakh crore.