India’s cement industry continues to operate in a healthy environment for growth and expansion, despite facing short-term challenges over the past year in the form of increasing raw material, fuel, and distribution costs.

India, with its installed capacity of 500 MMTPA of cement at present, is estimated to have produced ~390 million tonnes of cement by the end of FY 2022-23, which points to ~9% Y-o-Y increase. Cement demand in India is expected to grow ~9% during FY 2023-24 to 425 MT, which is double the rate of global demand growth at ~5.1%. India continues to be the 2nd largest producer of cement in the world.

The growth in Cement and Building Materials industry can be attributed to a number of factors, including:

Government’s push for revamping policy and infrastructure development:

The Union Budget FY 2023-24 outlined the Government’s Amrit Kaal vision, which focuses on strengthening infrastructure, transport, and logistics sectors. This announcement follows on from the previous Budget’s commitment to PM Gati Shakti, a plan to reimagine the country’s logistics systems and infrastructure.

India’s capex for infrastructure development in Union Budget FY 2023-24 as a percentage of GDP has increased to 3.3% of GDP, from ~2.9% in 2022-23. It amounts to an allocation of ₹10 lakhs crores, which is 3x the allocation for 2019. Yet, the increase is particularly significant when combined with allocations for transportation and logistics, effectively marking it upwards of ₹13.7 lakhs crores i.e., 4.5% of GDP. Together, these developments will spur economic activity overall and growth in both sectors.

(Source: Outlook India)

Economic growth powered by an expanding middle class:

The Indian economy is expected to grow rapidly by 2030, led by its rising middle class (defined as households with annual income of between ₹5 lakhs and ₹30 lakhs).

A World Economic Forum (“WEF”) report has said that by 2030, 80% of households i.e. ~140 million homes will be middle-income, and will drive 75% of the country’s consumer spending. Recent surveys have revealed that out of India’s top 63 cities with a population exceeding one million, they collectively contribute 29% of the nation’s disposable income. The increasing expenditure and improving living standards are likely to stimulate investments in various sectors, including real estate.

(Source: Economic Times and livemint )

Rising real estate demand:

Following the impact of COVID-19, the real estate industry in India has experienced a dramatic recovery. In the year 2022, there has been a significant surge of 41% in the introduction of new residential projects.

Not only residential real estate, the demand for offices and commercial property, including warehousing has risen significantly as well. Gross office leasing is up by 36% Y-o-Y (51.6 million sq.ft.). These trends herald renewed interest from developers across segments and are likely to drive robust growth over the coming few years.

(Source: Economic Times Source)

Moreover, the PM Awas Yojana continues to surge the demand for real estate in the country. During the Union Budget FY 2023-24, ₹79,000 crores were set aside to encourage affordable housing, demand for which is expected to grow ~12% during FY 2023-24. The extended credit-linked subsidy scheme until 2027 will further boost spending.

Furthermore, the move is supported by the government’s SMART Cities Mission, which aims to create ‘Sustainable Cities of Tomorrow’, with an allocation of ₹16,000 crores. The development of these cities will result in an increase in the middle-class population with higher spending power.

(Source: Union Budget FY 2023-24)

ESG priorities:

Nuvoco, in conjunction with the entire Indian cement industry, places paramount importance on environmental, social, and governance factors. The Indian cement industry has garnered global recognition for its high standards of transparency in communication, steadfast commitments, and decisive actions in the fields of ESG. It stands out as the sole sector to have voluntarily devised a comprehensive Low Carbon Technology Roadmap, with the ambitious aim of achieving a notable 45% reduction in direct CO₂ emissions intensity by the year 2050, measured against a 2010 baseline. The Global Cement and Concrete Association (“GCCA”) and Cement Manufacturers’ Association (“CMA”) cement associations in India, presently working on Net Zero Roadmap for Indian Cement Sector.

Furthermore, the industry has been actively championing the adoption of blended cement variants, which has witnessed a commendable increase from 28% in 1992 to an impressive 73% currently.

(Source: Cement Manufacturers Association)

Despite notable advancements in energy efficiency and productivity within the Indian cement industry, there continues to be a noteworthy concern surrounding the utilisation of alternate fuels and raw materials (“AFR”). Presently, the Thermal Substitution Rate (“TSR”) of the Indian cement industry ranges between 5% and 6%. As a result, co-processing waste-derived fuels and raw materials in the cement industry is an opportune solution with multiple advantages for a country like India.

(Source: Cement Manufacturer’s Association)