India on the recovery path
India’s cement industry made a strong comeback in 2021 as the economy started showing a visible post-COVID-19 recovery. The sector posted steep YoY growth of 21 per cent – a level not seen in recent decades – pushing overall production to above pre-pandemic levels. However, sustaining the situation through 2022 may prove challenging.
As the Indian economy commenced its post-COVID-19 recovery, cement demand has returned.
However, the strong YoY growth may not be sustainable
Various government-backed infrastructure projects, several state-level elections and, most importantly, an unexpected surge in the Individual House Building (IHB) segment collectively aided the growth of India’s cement industry during 2021. The low base effect did play a role for a few months, with pent-up demand helping the sector regain its high growth trajectory. With the exception of two months (January and November), the rest of the year saw growth as cement producers stepped up production to meet rising demand. Nevertheless, while production figures look promising, the finances of the sector continue to remain under pressure due to higher input costs and the inability to fully pass on the total increase in costs to consumers given the excessive capacity.
