Over the past year, India’s infrastructure construction sector has been driven by high public capex, a strategic pivot towards efficiency and monetisation, and the rapid adoption of green and digital construction practices. The momentum is strongest across the transport sectors, including roads, rail, metros, logistics and urban rail, with private capital coming from public-private partnerships (PPPs) and infrastructure investment trusts. The construction sector is now slowly transitioning from a phase of recovery to that of rapid execution. The sector is currently defined by three major pillars – digital transparency, multimodal efficiency and mandatory sustainability.
Bigger outlays, smarter strategies
Union Budget 2025-26 has raised capital expenditure to Rs 11.2 trillion, marking a 10 per cent leap and shifting its focus from mere outlays to outcomes. Ministries are now steering towards PPP-based project pipelines. This helped close 2024-25 on a strong note, above Rs 10.18 trillion despite early-year disruptions caused by elections and monsoons.
Construction firms that adapt to these policy shifts can unlock growth, improve efficiency and stay competitive in India’s rapidly evolving infrastructure landscape.
Earlier, high GST rates on essential materials such as cement and steel had inflated project costs. The latest budget has reduced the GST rate on cement from 28 per cent to 18 per cent and on steel from 18 per cent to 12 per cent. Further, it has broadened input tax credit eligibility for infrastructure projects, enabling developers to claim deductions on procurement expenses. These reductions are projected to decrease material costs by up to 10 per cent, promoting more affordable housing and commercial developments while strengthening profit margins for developers and contractors.
Further, lengthy approval processes led to significant project delays and higher administrative expenses. A new single-window digital approval system now streamlines land acquisitions, environmental clearances and municipal permits, minimising reliance on physical documentation and in-person submissions.
Similarly, small- and mid-sized contractors have struggled to secure loans owing to rigorous collateral demands and high interest rates. The Credit Guarantee Scheme has now been expanded to Rs 0.1 billion for mid-sized contractors, while micro and small enterprises can access loans up to Rs 0.5 billion at reduced interest rates with eased collateral requirements. This improved credit availability empowers contractors to expand operations, pursue larger bids and maintain stable cash flows.
Powering economic growth
The construction industry remains a cornerstone of India’s economic progress, acting as both a strong growth driver and a reliable indicator of the country’s momentum.
The Indian economy has entered 2026 on a firm footing, with 2025-26 real GDP growth estimated at 7.4 per cent, up from 6.5 per cent in 2024-25. This robust performance can be attributed to increasing investments, a revival in manufacturing and pragmatic policies that cushion the impact of external pressures such as US tariffs. At its core lies infrastructure capital expenditure, functioning as a high-multiplier force that amplifies economic output through construction-intensive projects. The sector accounts for approximately 8 per cent of total gross value added (GVA), expanding at a pace faster than overall GDP growth.
Real GVA for 2025-26 is projected to reach Rs 184.5 trillion, reflecting a 7.3 per cent growth from the previous year’s provisional Rs 171.87 trillion, while nominal GDP is expected to rise by 8 per cent to Rs 357.14 trillion. Favourable monsoons have supported agricultural growth in the primary sector, a vibrant services industry has anchored the tertiary segment, and healthy corporate balance sheets have encouraged private participation.
Within the secondary sector, which includes construction, GVA growth broadly mirrors this economic upswing. Therefore, the construction sector has emerged as the infrastructure bellwether. Its share in total GVA stands at a consistent 8 per cent, driven by a sustained mix of private and public spending. The sector received a capex of Rs 11.2 trillion for 2025-26 across roads, urban rail, energy grids and logistics. This investment is expected to generate jobs, drive supply chain spillovers and deliver multiplier effects estimated at between 2.5 and 4.8 times.
Tracking on-ground progress
The centre has promoted infrastructure creation through a series of transformative initiatives. The PM Gati Shakti National Master Plan streamlines planning and execution, while programmes such as the Bharatmala Pariyojana and Sagarmala are reshaping road and port connectivity. The country is also investing heavily in dedicated freight corridors, high-speed rail systems, greenfield airports, ports and metro networks. Supporting these diverse efforts is the National Infrastructure Pipeline, designed to ensure rapid and continuous development across the board.
In the airport sector, the maintenance, repair and overhaul (MRO) industry is on the cusp of significant expansion, driven by accelerating aircraft procurement, rising air passenger traffic and strong policy support. The country has emerged as the world’s third largest domestic aviation market, with airports handling approximately 250.73 million domestic passengers between January 2025 and September 2025. The MRO capacity is expanding rapidly, with several major projects under way to enhance domestic maintenance capabilities and reduce overseas dependency. At Kempegowda International Airport in Bengaluru, IndiGo is setting up an MRO facility spanning over 31 acres, featuring up to 12 bays to service both narrow- and wide-body jets. In Bhubaneswar, Odisha’s first MRO facility at Biju Patnaik International Airport, utilising a 4,670 square metre hangar, has been handed over by the government to Air Works India for development, operation and management, with operations expected to begin by early 2026. Additionally, Madhya Pradesh’s first MRO facility is set to be established by 2026 at Raja Bhoj Airport in Bhopal, at a cost of Rs 250 million.
The past year has witnessed sizeable capacity additions, with the inauguration of new airports at Rewa, Ambikapur, Saharanpur, Amravati and Satna; new terminals at Jaipur, Patna and Tuticorin; and several expansion projects at existing airports. Moreover, cargo infrastructure has gained traction. India’s largest greenfield domestic cargo terminal was inaugurated in Bengaluru in February 2025.
In contrast, highway development witnessed a phase of a mild slowdown in 2024-25, deviating from its accelerated growth trajectory, as both project award and execution saw a decline. During the year, around 10,660 km of national highways were constructed, an annual decline of around 14 per cent. Despite the dip, the average construction pace remained at a healthy 29 km per day, supported by a strong project pipeline developed over the years.
Indian Railways (IR) has also made notable progress over the past year, driven by its sustained focus on infrastructure expansion, electrification, safety enhancement and passenger-centric services. Over 3,400 km of new tracks have been operationalised, more than 3,000 route km electrified and advanced safety systems like Kavach 4.0 have been rolled out.
India’s maritime sector is experiencing significant growth, attracting substantial investment and entering into national and international partnerships. Connectivity enhancement projects are under way. For instance, the Maharashtra cabinet has recently approved a 105 km freight corridor linking Vadhavan port to the Samruddhi Expressway, significantly improving hinterland access and logistics efficiency. Around 70 per cent of construction work on the Ramayapatnam port project has been completed. The proposal to increase the dredging range from 16 metres to18.5 metres for the passage of cape-sized ships is yet to be approved.
Construction progress has been steady, with the completion of about 45 per cent of construction work on the Machilipatnam port project Phase I completed; about 54 per cent of construction work at Mulapeta (Bhavanapadu) port; and 29.92 per cent of construction work at the Kakinada Gateway port project.
The West Bengal State Maritime Board recently issued a fresh global request for proposal for the development of the Tajpur deep-sea port. The detailed project report for the international container transshipment terminal project at Great Nicobar has been prepared. A tender for the project is likely to be issued by July 2026. Moreover, the Paradip Port Authority, the Visakhapatnam Port Authority, Sagarmala Finance Corporation Limited and the Odisha government signed an MoU for the development of the Bahuda port in September 2025.
The logistics sector has been experiencing an upward trend, focused on improving efficiency. What was focused primarily on the movement of goods from one point to another has evolved into a comprehensive strategy encompassing supply chain optimisation, cost reduction in transportation, focus on multimodality, integrated planning and enhanced customer satisfaction. Multimodal logistics parks (MMLPs) have been awarded in Jogighopa, Indore, Chennai, Nagpur, Bengaluru and Jalna. The Nagpur MMLP has started commercial operations. Meanwhile, bids have been invited for MMLPs in Anantapur, Pune and Nashik.
The way forward
India’s economic optimism rests on its demographic dividend – a large, productive workforce and a rising middle class fuelled by increasing incomes, urbanisation and robust domestic consumption.
The construction sector stands at the forefront of this momentum, set to emerge as the world’s second largest market by 2030, with its GVA climbing to Rs 21.8 trillion, growing at a CAGR of 7.2 per cent. Government initiatives are accelerating this momentum through massive infrastructure spending, affordable housing and inclusive growth. Efforts to make India a manufacturing powerhouse through Make in India and production-linked incentive schemes will further drive industrial output, exports and capacity. Further, the Pradhan Mantri Awas Yojana continues to promote affordable housing for low-income families, creating new demand and fostering inclusive growth.
Going forward, the construction sector is set to witness robust growth, driven by higher budgetary allocations for infrastructure and flagship infrastructure projects. However, headwinds persist. Prolonged geopolitical tensions, global trade volatility and climate-related risks could slow down momentum. That said, with efficient deployment of capex and greater adoption of green and digital solutions, India can sustain this trajectory, with construction playing a critical role in propelling the economy towards trillion-dollar milestones in the years ahead.
Harman Mangat
