India’s construction sector ranks third among the 13 major economic drivers of the country. Working across more than 200 sub-sectors, the segments that drive the construction sector in India are real estate, infrastructure development (road, railways, airports, ports, metro rail and water network development) and energy, and utility construction. In a bid to attract investments and enable the progress of the infrastructure and construction sector, various initiatives have been taken, which include the National Infrastructure Pipeline (NIP) and the Gati Shakti Masterplan. The NIP and the government’s target to make the country a $5 trillion economy by 2024 have opened up a range of opportunities in the construction sector.
Growth trends
The construction industry was severely impacted by the outbreak of Covid-19 and its subsequent waves. However, the sector has now stabilised and is registering growth. According to Ministry of Statistics and Programme Implementation data, the gross added value (GVA) of the construction industry decreased from Rs 10,386.8 billion in 2019-20 to Rs 9,628.35 billion in 2020-21 registering a de-growth of 7.6 per cent. In 2021-22, the GVA stood at Rs 10,735.95 billion (provisional estimates), an increase of 11.5 per cent.
In terms of quarter-on-quarter growth, the construction sector grew by 16.8 per cent in the first quarter of 2022-23 over the GVA of the corresponding period in 2021-22 (from Rs 2,251.66 billion in 2021-22 to Rs 2,629.18 billion in 2022-23). The GVA registered in the first quarter of 2021-22 was 71.3 per higher than that in the first quarter of 2020-21 at Rs 1,314.37 billion. The sharp increase in GVA was on account of a low base in 2020-21 due to construction coming to a grinding halt during the initial phase of Covid-19. The growth in 2022-23 was on account of the government’s focus on infrastructure projects. Meanwhile, in the second quarter of 2022-23, the construction sector witnessed a growth of 6.6 per cent, from Rs 2,430.71 billion in 2021-22 to Rs 2,590.98 billion in 2022-23.
According to ICRA, the construction industry is expected to record a stable revenue growth in the medium term. The overall construction GVA is likely to grow at 9-11 per cent in 2022-23, due to the government’s emphasis on infrastructure development, a robust order book and a low base effect. In the construction sector, the roads and buildings segments have continued to account for significant growth. In recent years, metro/urban infrastructure, water and sanitation have also shown steady progress.
Increased deployment of digital technology
The outbreak of the pandemic brought to light the importance of digital and technological tools. The construction sector is now deploying digital technology at a fast pace. Real-time monitoring of projects and use of building information modelling (BIM) for designing and planning purposes have gained traction with a view to ensuring the timely completion of projects and avoiding cost overruns. The adoption of BIM also reduces the scope for errors and iterations. Some of the projects where BIM is being used are the Bengaluru International Airport, Nagpur Metro Rail Corporation, Personal Rapid Transit System in Amritsar, Delhi Metro Rail Corporation (DMRC), Guwahati International Airport and the renovation of Gwalior railway station. BIM technology has also been leveraged for designing and installing railway signalling systems.
In India, the Nagpur Metro was the first to adopt the five-dimensional (5D)-BIM based digital project management platform, which provided an integrated view of the project by linking the 3D model, project schedule and cost. In another development, DMRC implemented a custom-made project monitoring software, the integrated project monitoring software, to monitor the progress of the Delhi Metro Phase IV corridors and the Patna Metro project. Meanwhile, IoT-based digital monitoring systems, advanced analytics, drones, and supervisory control and data acquisition systems are being used to manage projects more efficiently.
Moving towards alternative and sustainable material
India is moving steadily towards the adoption of sustainable and environmentally friendly development practices. The adoption of green construction material is being promoted in order to meet the government’s goal of carbon emission reduction by 1 billion tonnes by 2030. The roads ministry is making several efforts to use steel and cement alternatives in road construction. This is primarily being done to reduce the cost of road construction while maintaining the material quality. Bitumen is being mixed with shredded waste plastic, rubber, iron slag, fly ash, and construction and demolition waste to construct roads. To that end, in 2021, more than 703 km of national highways have been constructed with the use of plastic waste. The first road in Guwahati was constructed by using 1.24 million tonnes of plastic waste. The road has been constructed in the Narangi Military Station area of the city. Many cities such as Mumbai, Kochi and Noida have made use of plastic waste in road construction.
Meanwhile, high performance concrete and ultra-high performance, fibre-reinforced concrete are being used to replace the conventional concrete and steel bars. Geopolymer concrete is being used as an eco-friendly alternative to Portland cement in road construction. Roads are the major users of geosynthetics, primarily geogrids. It is used in road works for creating slopes or for slope rehabilitation, widening of pavements, erosion control, filtration and drainage. Nearly 70-80 per cent of the geogrids market is for the road sector, and the remaining is used in coastal erosion, railway, airports and tunnels. In April 2022, India constructed its first-ever 1 km steel slag road in Surat.
The railway sector is also switching to the use of aluminium for making rakes and wagons. After successfully opting to use aluminium for metro rakes, the country is now adopting aluminium in long distance trains like the Rajdhani and the Shatabdi Express. Aluminium is the future material for railway architecture, be it for coaches and wagons or other signalling infrastructure and station furniture. Owing to its corrosion-resistant nature, aluminium has the potential to extend the lifespan of railway coaches to nearly 40 years with less maintenance requirements. New materials are being used and explored to improve the durability and strength of railway systems.
Trends in the construction equipment market
In 2021-22, the construction equipment market in India witnessed a decline of 8 per cent. The sales of construction equipment declined from 92,470 units in 2020-21 to 85,385 units in 2021-22. According to the Indian Construction Equipment Manufacturers Association, the earthmoving equipment segment witnessed a decline of 14 per cent during 2021-22. Meanwhile, road construction equipment sales decreased by 10 per cent during the same period. The de-growth in 2021-22 is primarily on account of the second and third waves of Covid-19, which not only impacted the pace of construction activity in the country but also caused supply chain disruptions. Cyclones and heavy rains, particularly in south India, also impacted the pace of construction and demand for construction equipment. According to industry estimates, the sale of construction equipment (domestic sales and exports) is expected to grow by 15-20 per cent in 2022-23.
Various new construction techniques and equipment are being deployed in the construction space. This includes the use of new track construction machines for laying railway tracks, deploying prefabricated and modular construction, etc. Apart from this, smart machines have been deployed for various activities such as the construction of tunnels in the Bhanupali-Bilaspur-Beri new railway line project. The use of these machines accelerates the excavation work, reduces the turnaround time, avoids overcuts and undercuts, and improves blasting efficiency. Further, for underground tunnelling in metro rail projects in cities such as Mumbai, technology-driven smart construction equipment is being used. Going forward, the country is expected to make investments in the smart construction equipment segment as well.
Outlook and opportunities
The outlook for the construction sector is positive, backed by government support in the form of investments and focus on infrastructure development in the country. Various big-ticket programmes such as Bharatmala, Sagarmala, station redevelopment, dedicated freight corridors, high speed rail systems, construction of greenfield airports and expansion of brownfield airports have opened up various opportunities for stakeholders. Even though the sector received a backlash due to the outbreak of Covid-19 initially, it has recovered from the impact of the pandemic. With the NIP having an estimated capital expenditure of Rs 111 trillion, to be spent over the period 2019-20 to 2024-25, the construction industry is set to grow manyfold. The adoption of new and improved technologies and better construction equipment, and a shift to innovative construction materials will help the construction sector push sustainable infrastructure development in the country.