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Just like the 2022-23 Union Budget, the Indian government has announced an increased infrastructure spending for FY 2023-24. In their effort to provide a strong impetus for job creation and strengthen macroeconomic stability amid a global slowdown, the government has increased its infrastructure budget to INR 10 trillion. The capital expenditure has been allocated toward the development of railways, roads, power stations, telecommunications, and affordable housing.
In the highest-ever rail outlay, the Indian government has allocated a significant INR 2.4 trillion, which is nine times what was made available in the financial year ending March 2014. In the transportation sector, the Indian government also announced spending on the transportation sector to boost first-and last-mile delivery in the fertilizer, food grain, coal, steel, and port sector. Along with an investment of INR 600 billion from the Indian government, an additional INR 150 billion will be infused by the private sector towards the development of transport infrastructure in India.
From the growing spending on infrastructure projects, Indian conglomerates such as Tata Group are projected to benefit from the short to medium-term perspective. Tata Group, for instance, is planning to invest US$90 billion towards semiconductors, mobile manufacturing, and electronics-related projects. Other conglomerates, including Adani Group and Reliance Group, will also benefit from the infrastructure push laid out by the Indian government in the 2023-24 budget. By 2030, Adani Group has announced plans to invest US$107 billion in India. Furthermore, Reliance has announced an investment of US$76 billion toward clean energy projects.
Aditya Birla Group, another Indian conglomerate, also announced plans to enter the green energy segment in India. Vedanta Group, on the other hand, is seeking to invest US$20 billion to manufacture semiconductors in alliance with Foxconn. All of these firms are projected to benefit from the higher spending on infrastructure projects in India. The government is also focusing on reviving 50 additional airports, heliports, water aerodromes, and advanced landing groundings in its bid to improve regional air connectivity. This will further support the growth of the infrastructure construction sector in India from the short to medium-term perspective.
The rising urbanization is one of the key factors driving the higher spending from the Indian government towards the development of key infrastructure. The spending announced in the Union Budget 2023-24 will also accelerate the growth of the construction sector in the affordable housing segment.
Furthermore, relaxation in income tax will also boost the disposable income of millions of taxpayers in the country. This is also expected to have a positive impact on the growth of the residential construction sector, as the demand for housing units will grow from the medium to long-term perspective in India. On the other hand, hikes in repo rates announced by the Reserve Bank of India might have a short-term impact on the affordable housing segment.
Along with the spending on various infrastructure projects, private sector investment in the commercial construction sector will also support the construction industry over the next 12 months in India. Apart from investment in the development of new manufacturing facilities, tech firms are also expected to increase their investment in the development of data center facilities from the short to medium-term perspective. The demand for co-location data centers has also surged significantly over the last three to four years, and the trend is projected to further continue in India. As a result, data center providers are seeking to expand their capacity and facilities, amid the growing digitalization across the country.
The high-growth environment of the Indian construction sector is also a piece of positive news for other construction-related industries. The growing activities in the infrastructure, commercial, and residential sectors are projected to drive the demand for cement from the short to medium-term perspective. This is one of the major factors that have driven the investment in the development and expansion of cement manufacturing capacities. Many leading players, in the segment, have announced an investment in the space to meet the growing demand for cement over the next few years.
The construction chemical market is also projected to grow as part of higher spending on infrastructure and the affordable housing segment. Overall, the Indian construction industry is projected to benefit significantly from the higher spending announced by the government under the Union Budget 2023-24.
To know more and gain a deeper understanding of the construction market in India, click here.
