Regional Analysis 2018 India

Knowledge Center

India Market Review - section updated Sept 2018

The Indian economy has continued to prosper in the last number of years, with recent IMF reports suggesting that India has overtaken China as the fastest growing economy in 2018. The IMF forecasts growth rates of 7.4% and 7.8% for the Indian economy in 2018 and 2019 respectively, with Timetric reporting a compound annual growth rate of 4.16% for the construction industry up to 2021. Growth is largely underpinned by an increase in foreign direct investment, brought on by the relaxing of foreign investment regulations and the introduction of the new Goods and Service Tax (GST) in January 2017. 

India has overtaken China as the world’s fastest growing economy in 2018.

Annual expenditure on construction projects accounts for almost 20% of Indian GDP (accounting for US$450-500 billion in 2018). Years of economic growth is beginning to catch up with the country’s infrastructure, which poses a threat to future growth in its current state. Investments of around US$777.73 billion are needed in national infrastructure by 2022 for sustainable development, according to the India Brand Equity Foundation (IBEF). This increased workload on the construction sector is likely to highlight deficits in the workforce; in particular, there is a need for more skilled and certified construction workers and engineers, if India is to successfully provide adequate infrastructure for sustained economic growth.  
The Indian Government has placed a major emphasis on the importance of improvements in national infrastructure in the Union Budget 2018-19, allocating US$92.22 billion for the sector. Increased engagement by the private sector is aiding in the delivery of key infrastructure projects, including roads, communications, transportation and energy. The large volume of work forecast in the sector and increased funding are making it an attractive prospect for global construction players and FDI alike, with FDI inflows in Indian construction (including infrastructure) forecast to reach US$12.36 billion in 2018 according to IBEF.
Recent years have seen an upsurge of activity in the Data Centres space in India, with the sector set to almost double between 2016 and 2019, reaching revenues of US$2 billion. This increase of activity in the sector is putting pressure on India’s current IT infrastructure, as 84% of its data centres are located in Mumbai, Chennai, New Delhi, Bangalore and Pune, according to Data Economy.
Real estate, including housing, retail, hospitality and commercial , is the second largest employer after agriculture in India, and the industry is set to grow by 30% over the next decade according to IBEF. The Indian residential market has seen a decrease in activity over the last number of years, due to the overproduction of premium housing projects that are unaffordable for the majority of the population. However, the Government has set in place an aggressive plan to tackle the current housing issue and deliver affordable housing to the lower and middle income communities.