Posted on 26 Jan 2016
India’s liberalisation of foreign direct investment (FDI) rules in real estate and construction could help revive the country’s steel industry and boost economic growth amid “…doom and gloom” in the global economy. So says Associated Chambers of Commerce & Industry of India (Assocham).
“The construction sector, which is the second largest employment generator… has the multiplier potential to create benefits at least double the size of direct inputs,” Assocham says in a report. “The output multiplier demonstrates how an increase in demand of Indian construction sector can lead to an increase in overall output of the economy by 2.4 times, thereby showcasing strong backward linkages of the sector with ancillary and complementary industries such as cement, steel, iron.”
Over 75% of real estate projects worth over INR 14 lakh crore ($207 billion) were delayed in the fiscal year through March 2015 due to various issues such as delays in environmental clearances, project approvals, and lack of finance. Also hindering progress are “…badly executed public-private-partnership models that are crippling growth of construction in India,” says Assocham secretary general D S Rawat. Another major problem is high debt in the sector.
“With the union government liberalising FDI rules in the realty and construction sector, we are hopeful that it will lift the affordable housing space, revive steel, cement and other related sectors, rev up the employment scenario and boost gdp growth,” Rawat observes in the report seen by Kallanish.
The construction sector’s contribution to gdp in India has stayed fairly constant at around 7-8% annually for the last five years. The sector absorbs 40-45% of the steel industry’s output, 85% of the paint industry, 65-70% of the glass industry, and a significant share of the automotive, mining and excavation equipment industries.
