Construction industry in India to contract by 1.7% as government announces extension of lockdown

Construction industry in India to contract by 1.7% as government announces extension of lockdown

The Indian construction industry is expected to contract by 1.7% in 2020, as the slowdown in 2019 has been compounded by the two-month lockdown due to COVID-19, says GlobalData, a leading data and analytics company. 

The slowdown in the construction industry in 2019 was due to liquidity crisis and slowing domestic demand in the residential segment. Although, the situation was expected to improve in 2020 due to government initiatives such as improving liquidity position and expanded infrastructure investments under the ‘National Infrastructure Program’, but the COVID-19 outbreak and the government’ containment measures will affect the construction industry in the short-term. 

Dhananjay Sharma, Construction Analyst at GlobalData, comments: “The residential sector, which was already facing weakness due to the liquidity crunch and a decline in new residential projects launched across major cities, will struggle to recover due to the supply and demand downturn that will be created by the lockdown. Construction work on residential projects across the country will be delayed amid the lockdown, while the temporary unemployment will have an impact on the income of people, thereby affecting demand for residential buildings over the short-term.” 

​Recently, India announced an extension of the lockdown by another two weeks, till 31 May 2020 – taking the total lockdown period to 69 days. However, the government has eased restrictions on economic activity across most of the country except in the containment zones.  

Sharma concludes: “In the second half of the year, the construction industry will benefit from the oil price crash, which would slash the country’s import bills and help the government to invest heavily on its flagship ‘National Infrastructure Pipeline’.”