Decoding India's Quest To Become World's Leading Cement Producer

Between 2013 and 2022, Indian cement manufacturers added a total production capacity of 217 million tonne. During the first five years, mid-sized companies, especially in the South, added almost half of these capacities, investing in expanding existing or building new plants. Large producers started a consolidation process after 2018, acquiring close to 38 million tonne of production capacity from small and mid-size manufacturers. 

While large companies could consolidate and expand their production, the manufacturing capacities of small and mid-sized manufacturers dwindled. After investing just before the pandemic, they came under profitability pressure, selling the lion’s share of their capacity additions to larger companies.

IndiaMart's first cement report stated that the Indian Cement Industry achieved a growth rate of 6.8 per cent year-on-year in FY 2023. It noted that the sector production is likely to grow at 8 per cent in FY2024. "The projected production output at the end of FY 2025 expects India to cross the 450 million tonne per annum milestone," it mentioned.

Today, cement is one of the eight core industries in India, with 583 tonne of manufacturing capacity installed and 391 million tonne of annual production output generated. The industry achieved a YoY growth rate of 6.8 per cent in FY23 and is projected to grow at 8 per cent in FY25. With this, the projected increase in output between FY25-28 will amount to 150-160 million tonne. 

The overall impact of the cement industry on the economy is substantiated by the multiplier effect of 4.16 times on economic output and 1.53 times on GDP. For every million tonnes of installed cement production capacity, 20,000 downstream jobs are created, indicating the role of cement in the country's growth.

What Water Is For Life, Cement Is For Modern India
The country boasts significant quantities of high-quality and capacity limestone reserves. This is coupled with an insatiable hunger for housing and infrastructure solutions, making India one of the best markets for a cement manufacturer. As housing solutions and infrastructure development for its people and businesses is a core priority of the Indian Government, cement manufacturers are the beneficiaries of industry-friendly policies. They prosper in a market with high demand and just a few competitors, manufacturing standardised products that hardly face a threat of substitution.

The overall impact of the cement industry on the economy is substantiated by the multiplier effect of 4.16x on economic output and 1.53 times on GDP. A robust infrastructure development, in turn, facilitates the sustained growth of Indian cement manufacturers. The industry is a well-established economic driving force and one of the eight core industries for a sustainable structural transformation of the subcontinent.

According to the IndiaMart report, “For every million tonne of installed cement production capacity, 20,000 downstream jobs are created.” While the Indian cement industry is predominantly privately owned, the top 10 companies account for around 70% of the cement production. With a small number of big players and a slightly larger number of small players, the Indian cement industry lies in the hands of a few large sellers who exercise controlling influence in the market.

The high-demand residential building sector exhibits price sensitivity. Builders can choose alternative materials, considering ease of use, cost or environmental impact. The rapid urbanisation in India continues to increase. With 39% of its population expected to reside in urban areas by 2030 and the average household size consistently declining, the shift towards smaller households will result in the construction of more residential units, the report added.

Cement remains a core area of growth for the Indian economy, owing to increasing demand in rural and urban housing. Added to it, the government's initiatives to invest in infrastructure development, housing, and transportation infrastructure are poised to provide a significant boost to the sector. The report will support buyers and suppliers in the sector to leverage the interesting trends and chart the journey of growth for themselves.