During the last five years, the Indian cement industry has shown resilience even amidst the global financial crisis. It is one of the eight core industries of the Indian economy. As of 2012, India was the second largest producer of cement in the world behind China. There has been a surge in capacity, consumption as well as production of cement during the last five years. However, per capita cement consumption in India is still amongst the lowest in the world. The vast potential that exists in the industry has attracted investors from all round the world. Three of the top four cement producers of the world have an established presence in India.
India’s cement industry witnessed growth even amidst a grim economic situation in the country in FY13. The demand supply gap that existed in the sector has allowed the cement companies to stay profitable. Housing and government spending on infrastructure were the major drivers of growth for the industry. Although the installed capacity has increased in the past few years, the cement companies of India were not able to utilize it to full extent. The industrial slowdown and consequent moderation in demand for cement resulted in a lower capacity utilization for the industry in the last four years. Furthermore, the rising cost of production brought the operating margins of Indian cement companies under pressure at the end of FY13.
However, the long term outlook for Indian cement industry is positive owing to a steady growth in housing and infrastructure development. Domestic consumption is expected to drive growth and expansion in the industry.
Key Findings
- Government spending on infrastructure has been a major source of growth for the sector. As of FY12, the investment in infrastructure was at 8.37% of GDP. This figure is projected to grow to 10.70% of GDP by the end of 12th Plan period (2012-17).
- During 2006-12, the annual cement consumption in India grew at a CAGR of 10%. In FY13, the consumption grew by 9.5% y/y, recording a recovery after witnessing a tepid 7.1% y/y growth in FY12. Government spending was one of the main drivers of this recovery.
- During 2008-13, the country’s installed production capacity increased at a CAGR of 12.1%. However, the addition in capacity did not result in a corresponding increase in production and demand. Hence, the industry’s capacity utilization has declined in the last four years.
- During 2008-13, the production index for eight core industries recorded a CAGR of 4.9%. Cement industry outperformed the overall growth by recording a CAGR of 7.6% during the same period. In FY13 too, while the overall production index recorded a 1% y/y growth, cement industry recorded a y/y growth of 9%.
Chart: Y/Y change in Index of industrial production (Base 2004-05=100)
Source: Ministry of Statistics and Program Implantation (MOSPI)
These are only a few of the insights in the new EMD Report : India Cement Industry. Learn more >>
Filed under: Asia, Cement, India, Industry
