Indian Construction Industry:
Construction Sector – Overview
Today, India is the second fastest growing economy in the world. The Indian construction industry is an integral part of the economy and a conduit for a substantial part of its development investment, is poised for growth on account of industrialization, urbanization, economic development and people's rising expectations for improved quality of living. In India, construction is the second largest economic activity after agriculture. Construction accounts for nearly 65 per cent of the total investment in infrastructure and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. Investment in construction accounts for nearly 11 per cent of India’s Gross Domestic Product (GDP). €239.68 billion is likely to be invested in the infrastructure sector over the next five to 10 years - in power, roads, bridges, city infrastructure, ports, airports, telecommunications, which would provide a huge boost to the construction industry as a whole. Investment into this sector could go up to €93.36 billion by FY2010. With such bullish prospects in infrastructure, affiliated industries such as cement are on a high. Cement consumption, for the first time, is set to exceed the 150-million tonne mark. Reflecting the demand for the commodity, capacity utilization rose to over 100 per cent to touch 102 per cent in January 2007 with dispatches touching 14.10 million tonnes as against the production of 14 million tonnes. As opportunities in the sector continue to come to the fore, foreign direct investment has been moving upwards. The real estate and construction sectors received FDI of €216.53 million in the first half of the current fiscal year.
The Indian economy has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the required extent of increasing growth rate up to the tune of 8 to 10 per cent. The Union Government has underlined the requirements of the construction industry.
With the present emphasis on creating physical infrastructure, massive investment is planned in this sector. The Planning Commission has estimated that investment requirement in infrastructure to the tune of about 14,50,000 crore or US$320 billion during the 11th Five Year Plan period.
India’s economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries and a multitude of support services & industries. Production, trade, and investment reforms have provided new opportunities for Indian businesspersons. India has an estimated 350 million middle class consumers:
• India is the second fastest growing economy of the world at present. India has recorded one of the highest growth rates in the 1990s. The target of the 10th Five Year Plan (2002-07) is 8%. India’s services sector growth of 7.9% over the period 1990-2001 is the second highest in the world.
• India is a young country with median age of population being 24.6 years & one-third of the population is below 14 years of age.
• Long run GDP growth from mid 1990s has now stepped up to 6.5% from an average of 5% a decade & half ago and less than 3% two decades ago.
• The average annual growth rate for the next few years is expected to be 7% to 7.5%
• The opportunities unfolding in India is as a result of reforms enacted from early 1990s as well as a result of India’s increasing competitiveness & confidence
• A unique feature of the transition of the Indian economy has been high growth with stability.
• 4th largest economy in terms of purchasing power parity.
• 350 million middle-class consumer market.
• Steady economic growth over 50 years.
• Increasingly transparent & open policies to access, investment, location, choice of technology, import and export.
• Government rapidly moving out of ownership / Management of commercial enterprises by a process of disinvestment of existing Government-owned businesses.
Positive outlook to international investments & trade policies.
• Fiscal incentives & Central Government & States support in physical & social infrastructure development.
Very large pool of educated and trained & skilled manpower
• Rapidly developing R&D, infrastructure, technical and marketing services.
• Agricultural self-sufficiency, rich mineral base and abundance of other natural resources.
• Large, diversified and geographically well distributed manufacturing capability.
• Diversified infrastructure facilities available and under development.
Administration and Regulations of Construction Industry:
Construction Projects are subject to a host of Central and State laws simultaneously. Administratively and in terms of regulation, Central & State Governments have their own roles to play in Construction.
Structure and Role of Construction Administration:
• Structure and Role of Construction Administration of Central Government &
• Structure and Role of Construction Administration of Local Government
New Materials, Equipment and Technologies:
New mega-project undertaken, involvement of international consultants, and participation of Indian consultants/contractors in international projects has led to infusion of new materials, equipment and technologies in the construction practices in India. While manufacturing of new materials is going on at a more aggressive pace, the manufacturing of new equipment is constrained by large capital investments and the uncertain markets. However, the growing market for such advanced equipment will eventually push the entrepreneurs to manufacture these also. On the technological front, the picture is abysmally low. The country has not invested adequately into making technical human resources capable of addressing the professional services needs of the construction industry like litigation, training of artisans, cost indices, contracting, insurance, finance, banking and taxation. On the engineering design front, the college education of the practicing engineers has not been adequately augmented from time to time with in-house or distance education modules. Thus, senior engineers are often found oblivious to new technologies and tools. As a consequence, the country is faced with a dire need for qualified technical manpower. The following are some of the newer initiatives of the construction industry in the area of materials and construction strategies.