Indian construction industry looks for $1.0 trillion funding for growth

The Indian construction industry registered a compound annual growth rate (CAGR) of 13.52% in nominal terms during the review period (2009–2013), driven by private and public investments in infrastructure, as well as institutional and commercial construction projects.

Industry growth is expected to remain strong over the forecast period (2014–2018), as a result of the government’s commitment to making infrastructural improvements and the implementation of the 12th Five-Year Plan (2012–2017), under which the government expressed plans to invest INR56.3 trillion (US$ one trillion) in various long-term development plans. Consequently, industry output is expected to record a forecast-period nominal CAGR of 10.09%.

According to the Ministry of Statistics and Programme Implementation, the construction industry’s value add at constant prices rose by 3 % in 2013 – up from 1.8% in 2012. The annual pace of growth has slowed, however, from an average of 8.5% in 2010-2011. The outlook for growth is positive, having been supported by government investment to improve the country’s infrastructure, education and healthcare, as well as spending on affordable homes to meet the country’s rising demand for housing. Large-scale investments in infrastructure development under the 12th Five-Year Plan will be an important driver of growth.

Infrastructure investment remains a key strategy for supporting economic growth. In its 2014–2015 budget, the Indian government increased its expenditure on the infrastructure sector and allocated INR1.8 trillion (US$27.3 billion); an increase of 8.6% over the 2013–2014 budget expenditure. This will contribute to the continued expansion of infrastructure construction over the forecast period.

With an aim to increase foreign exchange earnings from the tourism industry to INR1.5 trillion (US$26.0 billion) and attract eight million tourists by 2015, the government is focusing on the construction of new tourist destinations such as Tannirbhavi aquamarine park, the Bhaleydunga Skywalk in Gangtok and the construction of a film city at Hesaraghatta in Bangalore. This will help to support growth in the leisure and hospitality buildings category over the forecast period.

As a robust and modern transportation infrastructure is vital for the growth and competitiveness of the economy, the government is focusing more on infrastructure development. Accordingly, a total of INR56.3 trillion (US$1.0 trillion) is planned to be spent in the next planning period of 2012–2017; an increase in investment of 136.0% from the 11th Five-Year Plan. From this proposed investment, INR15.0 trillion (US$279.4 billion) will be spent on electricity, INR9.7 trillion (US$180.4 billion) on roads and bridges, and INR5.2 trillion (US$97.1 billion) on railways. The government plans to achieve these objectives through the PPP model, and attract half of the funding amount from the private sector.

The country’s rising population and urbanization trends will continue to provide some support for residential construction. According to the World Population Statistics, the country’s population grew by 17.7% from 2000 to 2011 – from 1.1 billion to 1.2 billion – and is expected to reach 1.4 billion and 1.6 billion by 2020 and 2040 respectively. As a proportion of the total, the country’s urban population increased from 27.8% in 2001 to 31.2% in 2011, and is expected to reach 33.0% by 2026. The country’s growing population and rapid urban development will create fresh demand for residential construction market over the forecast period.

Electrical drives market poised for big growth

Mumbai:  Indian Electrical Drives Market, which was valued at more than INR 15,000 million during FY2010-11, is expected to grow at a compound annual growth rate (CAGR) of 12 percent until FY2015-16, according to an analysis from Frost & Sullivan.

However, the Indian electrical DC drives market, which is losing out to the superior AC technology, was worth more than INR 800 million during FY2010-11 and is expected to grow at a CAGR of more than 4 percent until FY2015-16, the report said.

With energy accounting for 35-40 percent of energy-intensive industries’ production costs, the Centre is stressing the need for energy efficiency, thereby giving a leg up to the domestic electrical drives market.

Government initiatives such as the Bureau of Energy Efficiency’s (BEE’s) perform-achieve-trade (PAT) scheme that allows industries to derive business benefits through the exchange of energy savings certificates will give a huge boost to the uptake of electrical drives. Further, the BEE’s Star Rating program, which rates buildings based on their energy usage, will also drive the demand for AC drives.

There is substantial scope for the deployment of AC drives for energy conservation in the nine designated sectors of electric power generation, fertilizers, steel, cement, pulp and paper, aluminum, chlor-alkali chemical industry, textile, and railways.

Even while acknowledging the need to save energy, end users with limited budgets are deterred by the electrical drives’ high upfront costs. This issue will fade into insignificance in due course, as leading drive suppliers are setting up assembling/packaging facilities in India.

“Many market leaders have regional facilities that assemble/package drives, indigenizing various parts and auxiliary equipment as much as possible,” said the analysis, adding, “This reduction in production costs enables them to lower their drives’ prices and compete against import-based manufacturers.”

While the electrical drives market is anticipated to witness a high double digit growth over the next six years, budget constraints of small- and medium-sized enterprises (SME) segment impedes the market from growing at its optimum pace. The SME segment contributes significantly to India’s gross domestic product (GDP), but has been bogged down by inadequate funds. They are particularly reluctant to invest in the expensive MV drive segment.

“High price has been a major hindrance in the growth of MV drives,” noted a Frost & Sullivan analyst, adding, “However, with increasing standardization, their prices are expected to drop, facilitating their acceptance among SMEs.”

Construction Equipment Market to Grow by 20%

NOIDA: With several global original equipment manufacturers (OEMs) foraying into Indian construction space through joint ventures, the Indian construction equipment market is expected to witness a Compound Annual Growth Rate (CAGR) of 20% year-on-year during 2011-2015.

RNCOS, a market research consulting Services Company, in its latest research report “Booming Construction Equipment Market in India” said due to the impact of joint ventures and collaborations by global construction equipment manufacturers in India, the industry is poised for big growth in the years to come. “The industry is expected to witness a CAGR of 20% during FY 2011-2015,” said the report.

The construction equipment industry in India witnessed a consistent growth in the past few years despite the global economic crisis. Supported by the government's favorable policies, the infrastructure and construction projects in the country are increasing, the study noted.

The report, spread over 45 pages, provides a comprehensive research and rational analysis of the current status and expected position of the construction equipment market in India. It meticulously examines the prominent emerging trends and drivers, which are fueling growth in the industry. Highlighting major segments, such as earth moving, and material handling, the report also facilitates the future outlook for rental and equipment financing in India.

Some of the key findings of the report are: India’s earth moving sector to register an impressive growth over the next few years; Construction equipment rental business in India is all set to enter a crucial growth phase; Market for after sale services to capture the untapped space in India and Construction equipment financing market has huge potential.

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