Construction activity gets boost from govt fund, state projects; migrants return to work

The central government’s funds towards various construction projects have helped to spur the demand in the construction equipment sector. On the back of increased demand under NHAI, PMGSY, irrigation projects, rural infrastructure, and an uptick in mining segment activity, the industry reported a healthy pick-up in volumes during the fiscal’s second quarter, said a report by ICRA. Surprisingly, while the government and private companies were struggling with cash crush, demand started to pick up in late June/July, and has continued to hold strong till November 2020, the report added.

The construction equipment sector has been reeling under stress right from the time of general elections held last year. Further, the pandemic and the subsequent economic slowdown hit the sector’s performance. Nevertheless, the demand shot up during the third quarter and the volumes are expected to grow moderately in FY2021, despite Q1 being a complete washout in terms of volumes and business activity.

A survey held across the country indicated that even as some southern and western states continue to grapple with the absence of ample activity under state projects, dealers in the northern and central states have reported a pick-up in activity under state projects. While new projects have not been announced, activity has picked up under old projects.

Major roadblocks

Though the demand is on a rise, a cautious financing environment and supply chain issues continue to restrict volume growth across various markets. Most dealers expect prices to rise up to 10 per cent due to the new emission norm changes. However, another major hurdle related to the unavailability of migrant labourers seems to have eased now. Most states are not facing labour shortages as the dealers have reported that a large proportion of migratory labour which returned to home towns during the lockdown have returned to their work locations.