Wider context

The Indian economy exhibited macro-economic resilience despite slow and uneven global economic performance. The nation recorded a growth rate of 8% for two consecutive quarters, 2Q/3Q FY2024, while recording 5.9% growth in 4Q FY2024.

This performance showcased the steady year-on-year growth of 7.6% for FY2024, setting the stage for similarly strong performance in FY2025, pegged at 6.7% by the Reserve Bank of India (RBI).

The gross goods and services tax (GST) collections hit a record high in April 2024 at ₹2.10 lakh crore. This represents a significant 12.4% year-on-year growth, driven by a strong increase in domestic transactions (up 13.4%) and imports (up 8.3%).

Despite disrupted global supply networks, the manufacturing and construction industries contributed significantly to growth, accounting for 14.3% and 8.8% of gross value added (GVA). The service sector saw a 7% year-on-year rise. Recent agreements with non-European Union countries and ongoing negotiations with the United Kingdom for free trade will likely boost GDP growth.

Amidst elevated uncertainties stemming from adverse geopolitical developments, inflationary pressures show signs of decline. Consumer price inflation in most advanced economies has moderated significantly. The emerging market dynamics are more regionally dependent; India's headline inflation rate is 4.5%.

Footprints of robust construction activity are visible in rising cement production (approximately 4.5 million metric tons per annum) and increased steel consumption (15% year-on-year between February 2023 and February 2024), triggered by increased government spending on infrastructure and rising household demand for real estate.

Despite increasing home prices and higher interest rates on home loans, housing sales and launches were higher in 4Q of FY2024 (17%) than the previous year, accompanied by a decline in inventory overhang.

The rising Services PMI indicates the robust performance of the services sector, which has been in an expanding zone for the last 30 months, spurred by demand buoyancy, productivity gains and rising intake of new work. With the rapid adoption rate of Generative AI, Machine Learning across all sectors, and favourable forex settings for secondment to India, the overall sentiment in the services sector remains upbeat.

On the commodity front, input costs have decreased due to reduced global raw material prices, yet these reductions are compensated for by increasing labour costs of about 2% on project value.

With the outbreak of the Israel-Hamas war and the Red Sea crisis, commodities prices, including precious metals and crude oil, started to increase as the transportation costs almost doubled ($980 versus $2030 per twenty-foot equivalent container in 3Q and 4Q FY2024), leading to elevated procurement costs in construction projects where imports are major cost drivers such as data centres and high-end industrial plants.

The construction economic landscape in India for 2024 is poised to unfold in two distinct chapters, with the upcoming General Elections playing a pivotal role. The pre-election months may see a temporary slowdown due to subdued government spending. However, the post-election period is anticipated to witness a reinvigorated growth surge, fuelled by a promising uptick in private investments, instilling optimism for the future.

The Gleeds India Intelligence team conducted a comprehensive survey to inform this report. Prominent stakeholders from various construction and allied sectors have shared their invaluable insights, shaping our understanding of current market conditions and opportunities within India's ever-evolving construction landscape.