The cement industry is the second most important industry after the iron and steel industry and it plays an important part in the country’s economy.
The cement industry will see decent growth this year as the Indian government has announced to lay emphasis on the infrastructure development and Housing For All scheme in the Union Budget 2021-2022. Under the National Infrastructure Pipeline (NIP) programme, there will be increased funding for infrastructure projects in the country. The pandemic caused by Covid is posing a big challenge in the industry where there has been a huge impact with the disruption in the supply chain, labour shortage, issues with cash flows and because of this the real estate projects are either getting halted or delayed.
Usually, the growth in the housing segment which forms 60-65 per cent of cement demand is likely to see a decline because of the economic slowdown caused by the pandemic. Because of the public health emergency caused by the Coronavirus outbreak, and with the subsequent economic slowdown, there is going to be tremendous pressure on the Indian government finances. Adding to that, if the health situation worsens or if there is any further extension of the lockdown just like last year (2020), the liquidity of the cement industry could be affected because of this.
Apart from this, there are few other challenges too. The cost of cement manufacturers has also increased over the last few months because of the increased input materials such as coal, pet coke, diesel, etc. This has resulted in an increase in the costs of cement which is about 50-55 per cent of the total costs. Such overhead costs have affected the profitability of entities in the real estate sector.
But there is no need to lose hope. India ranks second in the world in terms of the production of cement. Also, India has a lot of potential for development in the infrastructure sector. The Government’s flagship project to develop smart cities in the country is an initiative that proves that the real estate industry is not completely on the decline. The favourable government policies towards the infrastructure and housing sectors is another factor that contributes towards the growth of the real estate industry. Furthermore, India is touted to be one of the largest exporters of clinker and grey cement to developing nations. According to an estimate, the production of cement is going to reach around 550-560 MT by the year 2025. In recent years, there has been a steady growth of construction materials due to the rapid urbanization across the world.
The demand for construction materials is expected from new housing projects as well as from restoration of existing projects and this will result in overall demand for cement and other construction materials and we will see positive growth in the cement industry. And once we recover from the Covid pandemic, we will witness a huge demand for cement and construction materials because of the booming real estate industry.