Indian construction industry to contract by 7.5% in 2020


Recently prior to the COVID-19 outbreak, the construction industry in India had been giving clear hints of weakness, with the local market facing struggle due to increasing unemployment, liquidity shortage in non-banking financial sector and a steep reduction in new residential projects across major towns. But now the outlook for the industry has deteriorated as a leading data and analytics company, Global Data has said that the Indian construction industry is now expected to contract by 7.5% in 2020, resulting from cumulative effect of carried over weakness from 2019 and COVID-19 lockdown.

Construction Analyst at Global Data, Mr. Dhananjay Sharma said that “The industry is expected to show an unprecedented decline in the second quarter as the strict lockdown to prevent the virus outbreak has largely brought construction to a halt, although construction work on some infrastructure projects was allowed from 20 April 2020.”

The quarterly value added data of Q1 2020 had showed the growth in ‘financial, real estate & professional services’ decelerating to 2.4% – the lowest growth rate in past decade, whereas the value-add at 2010 constant prices of construction Industry declined by 2.2% in same quarter. As per the World Bank, the Indian Economy is estimated to contract by 3.2% in the FY-2021.

Mr. Sharma also stated that “The state governments’ revenues have been hit harder than the central government’s due to the lockdown. As such, the state governments, which account for about half of the public sector infrastructure investments, are likely to reduce budgetary allocations on new projects. The Maharashtra government has announced that it would only release 33% of the budgetary allocation on capital expenditure in FY2021. Other states are likely to follow suit, thereby affecting growth of the infrastructure segment such as roads, metro rail projects, irrigation projects and water and sewerage projects.”