On 4 June 2024, the Election Commission of India announced the results of the Lok Sabha, India’s lower house of parliament. According to the results, the Bharatiya Janata Party (BJP), led by incumbent Prime Minister, Narendra Damodardas Modi, won 240 seats, whereas the Indian National Congress (INC) party, secured second place with 99 seats. The BJP won 240 seats, which is less than the 272 seats needed to secure a majority, meaning it will need to rely on the National Democratic Alliance (NDA) allies to form a government. The BJP-led NDA won 292 seats out of the 543 seats, whereas the INC-led Indian National Developmental Inclusive Alliance (INDIA) alliance, the main Opposition, secured 232 seats. Mr Modi is set to serve a third term as the prime minister of India with the support from his NDA allies, however, he is expected to face a tough challenge from the INDIA bloc. The recent election results are in contrast with the BJP’s dominant performance in 2019, when it had secured 303 seats independently, with the NDA alliance bringing the total seats secured to 353.
The expected continuance of the Modi-led NDA government bodes well for the country’s construction industry. Despite the underwhelming performance in the elections, which were held from 19 April to 1 June 2024 in seven phases, Mr Modi in his third term is likely to continue pursuing the party’s agenda to boost economic development, develop the country’s transport infrastructure and construct affordable houses, coupled with a focus on renewable energy, manufacturing, innovation, good governance, welfare of the poor, water and gas connection and permanent houses for middle-class families in the coming five years. In the election manifesto, Mr Modi had pledged to construct over 5,000km of railway tracks annually and the development of 15,000km of access-controlled highways, combined with the construction of ring roads around major cities to improve mobility. Moreover, the BJP had announced plans to invest in green initiatives to achieve 500GW of renewable energy, ramping up Green Hydrogen production and advancing the Green Energy Corridor project. To support affordable housing in the country, Mr Modi promised to expand the PM Awas Yojana to ensure every poor family has access to quality housing.
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The country witnessed immense progress and development during the last ten years under the BJP-led NDA government. The construction output contribution to GDP increased from 21.9% in 2014 to 22% in 2023, despite a sharp decline in 2020 during the Covid-19-induced lockdown, supported by public and private sector investments in the construction of residential buildings, green energy projects, and the expansion of transportation networks. Modi’s government took various initiatives and programs over the last ten years. The government had taken long strides towards the ‘Atmanirbhar Bharat’ mission, committed to ‘Panch Pran’, and had laid solid foundations for the ‘Amrit Kaal’. Development programs, such as ‘Housing for All’, ‘Har Ghar Jal’, and ‘Electricity for All’ have benefitted households across the nation. The ‘Atmanirbhar Bharat’ mission was started by the government in May 2020, towards making the nation self-reliant; the five pillars of the mission are economy, infrastructure, system, vibrant demography, and demand. Moreover, the government is developing new airports under the ‘Ude Desh ka Aam Nagarik’ (UDAN) scheme, promoting urban transformation via Metro Rail and NaMo Bharat, and implementing three major economic railway corridor programs; energy, mineral and cement corridors, port connectivity corridors, and high traffic density corridors, to improve logistic efficiencies and reduce costs.
Over the last ten years, infrastructure and energy and utilities construction sector contribution to GDP also increased from 10.89% in 2014 to 11.6% in 2023, driven by the Pradhan Mantri Gati Shakti National Master Plan, which was launched in October 2021. The Rs100tn ($1.3tn) Pradhan Mantri Gati Shakti National Master Plan aims to drive India’s economic growth by investing in the development of infrastructure, new economic zones, modern roadways, railways, waterways, and airways to reduce travel times across India. In February 2024, the Union Minister for Roads Transport and Highways announced several road construction projects across the country, including an investment of Rs35.5bn ($427.1m) for the construction of National Highway (NH) projects in the state of Madhya Pradesh. The projects in Madhya Pradesh include the 4-laning of a 41km section of National Highway-146 B (Shahganj Bypass end to Badi Package-IV), the development of a 6-lane service road along the Ayodhya Bypass, and the construction of the 34km long Chasale 6 lane Indore Western Bypass.
The energy and utilities construction sector’s output will be supported by the government’s aim to increase renewable energy capacity from 145.2GW in 2021 to 500GW by 2030 and achieve net zero emissions by the end of 2070. The sector output will also be supported by the Green Hydrogen Mission, approved in December 2023, under which Rs197.4bn ($2.4bn) will be invested over the next five years to achieve an annual production of five million metric tons of green hydrogen, alongside a concurrent increase in renewable energy capacity of approximately 125GW by 2030. The government will also expand and strengthen the e-vehicle ecosystem by supporting manufacturing and charging infrastructure.
The residential construction sector’s output will be supported by rapid urbanization, and the government’s commitments to construct affordable housing. The government continued to implement the ‘Pradhan Mantri Awas Yojana (PMAY – Grameen)’ initiative and is close to achieving its target of building 30 million houses under the rural housing scheme. Under the Pradhan Mantri Awas Yojana Gramin (PMAY-G), the government plans to build 20 million houses by the end of 2029. The government also plans to launch a scheme to help certain sections of the middle class living in rented homes, slums, or chawls and unauthorized colonies buy or build their own houses.
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By GlobalDataUnder the Financial Year (FY) 2024-25 (1 April 2024 – 31 March 2025) Interim Budget, approved in February 2024, the government allocated Rs2.8tn ($33.7bn) to the Ministry of Road Transport and Highways (MoRTH), Rs2.6tn ($31.3bn) to the Ministry of Railways, Rs775.2bn ($9.3bn) to the Ministry of Housing and Urban Affairs, and Rs128.5bn ($1.5bn) to the Ministry of New and Renewable Energy (MNRE). Higher budgetary allocations will help the ministry in developing more highways and expressways, amid difficulties such as rising interest rates and increasing land acquisition costs. Further supporting the construction industry’s output will be the government’s plan to construct 200,000km of national highways in the country by 2037. In January 2024, the Ministry of Road Transport and Highways (MoRTH), announced it plans to meet its highway construction target of 13,814km in FY 2024.
GlobalData expects the Indian construction industry might face downside risks owing to the BJP’s weak performance in the recent general elections. The BJP can still form a government with its NDA allies, but Modi’s position has significantly weakened, and the allies will have greater bargaining power, raising fears of political instability. The new government is likely to face pressure to increase welfare schemes as political parties engage in competitive populism to address the angst among voters who have consistently ranked inadequate jobs as their biggest concern. This is likely to force the government to divert more funds towards welfare schemes, which could lead to a slowdown in the momentum of government capital expenditure.
