Pestel Industry Analysis

PESTEL INDUSTRY ANALYSIS –
INFRASTRUCTURE/CONSTRUCTION
POLITICAL FACTORS
Political factors in a region play a vital role in facilitating the functioning and profitability of
the infrastructure industry and the liquidity in the market. There are multiple risks associated
with the political environment due to the sheer number of variables that come into play. The
political stability and environment should be assessed in order to determine whether there is
opportunity to diversify these risks and operate securely.
 The finance ministry has directed all central government entities to release 75% of the
disputed amount—estimated at ₹50,000 crore in 600 projects under litigation—
where contractors have won the arbitration but find their money blocked as
government entities move appellate tribunals.
 India is considering easing foreign investment rules for sectors ranging from
construction to animation to lure overseas capital needed to create jobs in an economy
cratered by the pandemic.
 Road infrastructure companies could be potential beneficiaries of planned investment
opportunities, according to the analysts who are keeping a keen eye on the sector
ahead of the Union budget this year.
 To bring much needed relief to judgment creditors, National Institution for
Transforming India Aayog (NITI Aayog) proposed measures to address the issues
plaguing the construction sector, for consideration of the Cabinet Committee on
Economic Affairs (CCEA).
ENVIRONMENTAL FACTORS
Every industry has concerns related the environmental factors affecting the long term
profitability of a company. Even more so for the infrastructure industry as there are several
laws and due diligence that companies have to incorporate into the daily activities performed
in order to preserve the environment as fit seen by the government of the region/market they
operate in.
 Noting continuous violation of environment norms in construction projects, the NGT

has directed the government to consider circulating standard operating procedure
(SOP) to all State Environment Impact Assessment Authorities (SEIAAs) for such
activities.
 India’s first consolidated database of air emission inventory report has been was
launched by The Energy and Resources Institute (TERI) in collaboration with
Environmental Defence Fund (EDF), a leading non-profit group that creates science-
based solutions to the most serious environmental problems across the world. The
‘Catalogue of Indian Emission Inventory Reports’ will give policy-makers and
scientists an open-source one-stop snapshot for referring published emission
inventory reports.
 The government has also incentivized going green for builders and consumers by
offering discounts on premium building charges and property taxes. Additionally, 1-
5% extra ground coverage and Floor Area Ratio (FAR) are amongst the benefits
available for constructive efforts to be green.
LEGAL FACTORS
The legal factors are in fact the most vital framework in protecting the assets of the
organization. Firms must extensively evaluate the legal framework of the market they want to
operate in order to assess the level of legal risk within that market.
 India’s construction sector is a manifestation of scattered legislation and uncertainty

in interpretation, leading to disputes and lingering litigation. Construction laws in
India are governed by various legislation, ranging from the 1872 Contract Act, to
extensive statutory provisions in labour laws including a few specific laws, such as
the Building and Other Construction Workers Act, 1996 and other state-specific laws
and regulations.
 On 9 August 2019, the Arbitration and Conciliation Act, 1996 was amended through
the Arbitration and Conciliation (Amendment) Act 2019. The changes introduced
seek to promote institutional arbitration in India and expedite the resolution of
commercial disputes by arbitration with a view to making the country a hub for
domestic and international arbitration.
 The Specific Relief Act, 1963 was amended in 2018 by the Specific Relief
(Amendment) Act, 2018. Section 20B prohibits any civil court from granting an
injunction order for any such infrastructural projects where the injunction can cause
impediment or delay the progress or completion of such project. This was an effort
towards relaxing the pressure on construction contractors or workers engaged in
disputes.
BIBLIOGRAPHY
 https://www.assetzproperty.com/blog/sustainable-initiatives-construction-
industry/
 https://economictimes.indiatimes.com/news/india/ngt-asks-government-to-issue-
sop-to-states-on-environment-norms-in-construction-projects/articleshow/
82969046.cms
 https://www.constructionweekonline.in/business/teri-and-edf-launch-catalogue-of-
indian-emission-inventory-reports
 https://www.business-standard.com/article/economy-policy/govt-considers-
easing-rules-to-attract-fdi-in-construction-sector-report-121012600528_1.html
 https://www.livemint.com/politics/news/construction-sector-may-get-50-000-
crore-liquidity-push-11636651832191.html
 https://www.mondaq.com/india/construction-planning/1137850/a-breather-for-
construction-projects-under-litigation
 https://www.livemint.com/industry/infrastructure/infra-sector-at-cusp-of-upturn-
driven-by-govt-push-analysts-11641322110250.html
 https://www.livemint.com/industry/infrastructure/road-logistics-sector-to-show-
healthy-growth-in-fy22-as-biz-activity-picks-pace-11641285182600.html
 https://www.ibanet.org/clint-june-2021-india-construction-laws-reform

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PESTEL INDUSTRY ANALYSIS –

 Noting continuous violation of environment norms in construction projects, the NGT

 India’s construction sector is a manifestation of scattered legislation and uncertainty

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