Construction sector’s share in India’s gross value added drops to 7.4 per cent

Construction sector's share in the country's economy has declined to 7.4 per cent in FY18, from 9.6 per cent in FY12, on drop in capital expenditure and subdued home sales, according to a report

Weakness in aggregate capital expenditure together with subdued real estate demand has resulted in decline in share of construction sector in India's GVA, says ASSOCHAM report

Construction sector’s share in the country’s gross value added (GVA) has declined to 7.4 per cent in FY18, from 9.6 per cent in FY12, on drop in capital expenditure and subdued home sales, according to a report. While public sector capital expenditure activities had picked up during the course of past few years, private sector spends remained weak due to issues faced in land acquisition, approvals, deferral of capital expenditure plans and overall subdued business confidence, the joint report by industry body ASSOCHAM and credit rating agency ICRA said.

“Weakness in aggregate capital expenditure together with subdued real estate demand has resulted in a decline in the share of the construction sector in India’s GVA from 9.6 per cent in FY12 to 7.4 per cent in FY18,” it said.

However, the report said that construction activities are expected to improve going forward with the government increasing focus on infrastructure projects and taking steps to improve the regulatory environment and funding avenues. Incentives for affordable housing projects and allowing 100 per cent foreign direct investment through the automatic route will give a much-needed boost to the construction sector, it added.

“The construction activity is highly dependent on government policies as part from direct projects awarded by the government institutions and approval of clearances are a must for the smooth functioning of the industry,” it added. The joint report noted that major opportunities for engineering, procurement and construction players are expected over next three to five years in railways, roads and metro rail segments.

It advised engineering, procurement and construction contractors to enhance their capacity and invest in latest design, engineering and IT technologies to ensure efficient execution of these opportunities. “Moreover, they need to focus on developing skilled manpower as the sector scales up,” it said.

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