Union Budget FY23’s Capex push to boost cement demand

Union budget FY23’s Capex push as well as continued focus on infrastructure development is likely to boost cement demand.

India’s Budget 2022-23 has earmarked a massive budgetary outlay of Rs 7.50 lakh crore for Capex. In her Budget speech to Parliament on Tuesday, Finance Minister Nirmala Sitharaman proposed to increase the capital budget outlay by over 35 per cent.

According to India Ratings and Research (Ind-Ra), the increase in the budgetedACapexAover the revised spending estimate for FY22 is likely to drive infrastructure spending that accounts for around one-fourth of the cement demand.

Besides, the cascading impact it has on the employment generation will aid in demand creation.

“After a 53 per cent increase in the estimated spend in FY22 to revive the urban spending which led to a recovery in the cement demand from the segment, the allocation to the urban infrastructure increased marginally to Rs 635 billion for FY23 from the revised estimate of Rs 619 billion in FY22.”

“Around 100 ‘Gati Shakti’ cargo terminals for multimodal logistics facilities are likely to come up in the next three years.”

As per the agency, the cement demand from the housing segment which constitutes around 65 per cent of the total cement demand is likely to be supported by the government’s continued focus on affordable housing, with the allocation of Rs 480 billion for the completion of 8 million houses under the ‘PMAY’ scheme.

“The allocation is in line with the revised estimate of Rs 478 billion for FY22, up 70 per cent from the budgeted estimate for the year.”

“The housing segment has been a key demand driver in the past few years, with the individual home builder segment displaying a remarkable resilience to the pandemic.”

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