Europe Biannual Construction Market Report 3Q/4Q 2024

To sum up, this current financial year has presented the Indian construction industry with tremendous opportunities for growth.

Inflation is on a tight leash, barring services inflation. Fluctuations in the latter relate to both wage and price setting, given that labour accounts for a high share of the costs in the construction sector. Higher wage growth, accompanied by weak productivity, could cause firms to increase their prices, especially when profit margins are already squeezed.

The escalation of trade tensions could also raise near-term risks to this inflation by increasing the cost of imported goods. On the balancing side, expectations are that operating leverage benefits will offset this heightened pressure and sustain a stable margin in the foreseeable future.

The growing emphasis on reducing carbon and progressing towards sustainable construction practices is both welcome and opportune. It opens up for innovation to digitally transform the industry and pivots the focus to pioneering green growth and building a net zero future.

The significant downside risks to this brighter picture remain as the unrelenting geopolitical tensions and volatility in global commodity prices, especially petroleum products. The recent outbreak of the Israel-Hezbollah war could potentially cause global supply chain bottlenecks and contribute to increased commodity prices, thus pressing on project viability. It can also concern the foreign direct investment (FDI) inflows, moderating the growth prospects.

With hopes of de-escalating tensions, the Indian economy can sustain its good performance. The expectation is that the macroeconomic buffers nurtured and strengthened during the post-COVID economic management will help it navigate these challenges reasonably smoothly for the rest of FY2025.