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Government infrastructure push to drive cement sector growth
Jul-28-2026

Cement is an essential component of infrastructure development and most important for construction industry, particularly in the government’s infrastructure and housing programs, which are necessary for the country’s socio-economic growth and development. The demand for cement, being a derived one, depends primarily on the pace of activities in the business, financial, real estate infrastructure sectors of the economy. The housing sector urban and rural cumulative is the biggest demand driver of cement, accounting for around 65 percent of the total consumption in India. The other major consumers of cement include infrastructure at around 25 percent and industrial and commercial construction at around 10 percent of the total consumption of cement in India.  Cement is a fine powder manufactured from limestone, clay, shells, silica sand, and other materials. India is the world’s second-largest cement producer after China. The cement industry plays a central role in construction and infrastructure development by supplying materials for buildings, roads, and various other structures that support urbanisation, industrial growth, and economic activity. The Indian cement industry is highly fragmented, with the presence of a few large players and several medium-sized and small players. The industry has various entry barriers, such as high capital costs, long gestation period, and inadequate availability of raw material, as well as transportation barriers, as railways and roadways are expensive modes compared with the sea transport.

Rising cement production in India

India's cement production has witnessed consistent growth over the past several financial years. In financial year 2026 (FY26), India's cement production is expected to reach approximately 490 million tonne (MT), up from 453 MT in FY25, representing an estimated year-on-year (YoY) growth of 8.17 percent. The steady increase in cement production reflects the strong growth prospects and expanding production capacity of India's cement industry.


 
Cement consumption shows consistent year-on-year growth

Cement consumption is expected to increase from 467 million tonne in FY25 to 499 million tonnes in FY26 (expected), representing an increase of 32 million tonne, or 6.85 percent year-on-year, supported by sustained growth in housing and infrastructure construction, rising urbanisation, and continued government focus on infrastructure led development. Cement consumption increased from 356 million tonnes in FY22 to 399 million tonnes in FY23, followed by a further rise to 445 million tonnes in FY24. 


 
Exports of cement 

India’s exports of cement, clinker, and asbestos cement products stood at $428.99 million in FY26 (April–February), despite variations in global demand conditions. India's cement exports witnessed a significant improvement in FY25 compared with FY24, with export value increasing from $587.71 million in FY24 to $685.12 million in FY25, representing a 16.57 percent year-on-year growth. The performance of India's cement exports highlights the industry's ability to maintain a strong presence in international markets, supported by competitive manufacturing capabilities and proximity to key export destinations. India's cement exports are primarily concentrated in neighboring South Asian markets, with Sri Lanka, the Maldives, Nepal, Bangladesh, and Bhutan being the major export destinations. India also exports cement and clinker to selected markets in the Middle East, Africa, and Indian Ocean regions, including countries such as Mauritius, Seychelles, the UAE, and Mozambique.


 
Average cement price sees marginal increase in FY26

The average price of cement increased from Rs 340 per bag in FY25 to Rs 345 per bag in FY26, reflecting an increase of Rs 5 per bag or 1.47 percent year-on-year. The modest improvement in prices has been supported by steady demand growth, increased infrastructure spending, and improving market conditions. Despite the slight recovery, cement prices remain competitive due to ongoing capacity additions and intense market competition among manufacturers. Cement prices are expected to increase by 3–5 percent in FY27. Industry players have initiated price hikes of Rs 10-12 per bag in April 2026, although the extent of cost pass-through remains contingent on demand-supply dynamics.


 
Impact of West Asia conflict on India's cement industry

India’s cement industry is likely to face margin pressure in the coming quarters on account of rising fuel and logistics costs driven by geopolitical tensions in West Asia. The conflict has triggered an increase in global crude oil prices, which directly affects the cost of critical inputs such as petroleum coke (petcoke), imported coal, and diesel. Fuel costs represent a significant share of the total production cost for cement manufacturers, making the industry highly sensitive to fluctuations in energy markets. Fuel costs have already begun to rise, with petcoke and coal prices witnessing an upward trend recently. As a result, overall production costs are expected to increase in the coming months. This cost escalation is likely to be reflected in the financial performance of cement companies in the coming quarters. In addition to fuel, other input costs are also under pressure. Packaging expenses, particularly for polypropylene (used in cement bags), are increasing due to their linkage with crude oil derivatives. Freight and transportation costs are also rising, driven by higher diesel prices and supply chain disruptions. Together, these factors are compounding the cost burden on cement producers.

Growth drivers for the cement industry

Growth in roads, railways, and airport networks to boost cement demand: India’s road network has expanded rapidly over the past decade, becoming the world’s second-largest. The national highway network has grown by 60.55 percent, expanding from 91,287 kilometer (km) in 2014 to 1,46,560 km as of December 2025. Flagship initiatives such as Bharatmala Pariyojana (including the subsumed NHDP), SARDP-NE, LWE Road Development Programme (including the Vijayawada-Ranchi Road), and Externally Aided Projects (EAP) have played a key role in accelerating this transformation, significantly strengthening road connectivity and boosting domestic cement consumption. Further, the expansion of Indian Railways’ infrastructure, including new track construction, track renewal and electrification, has significantly boosted the cement demand. During the period 2014-25, a total of 34,428 km of new track was laid at an average of 8.57 km/day. Track renewal has also intensified, with 6,851 track km renewed in FY25, over 7,500 km underway in FY26, and 7,900 km planned for FY27. The Union Budget 2026-27 has allocated a record capital outlay of Rs 2,78,000 crore for Indian Railways, reinforcing the Government’s commitment to enhance last-mile connectivity. The budgetary outlay is expected to increase the cement demand over the medium to long term. Besides, India has emerged as the world’s third-largest domestic aviation market, with the number of operational airports increasing from 74 in 2014 to 164 in 2025. Passenger traffic reached 412 million in FY25 and is projected to grow to 665 million by FY31. The rapid expansion in the number of airports has necessitated significant infrastructure development within and around airport premises, which is substantially increasing demand in the domestic cement market.

Pradhan Mantri Awas Yojana-Urban and Pradhan Mantri Awas Yojana-Gramin to support cement demand: The housing sector remains the largest contributor to India’s cement demand, and government-led affordable housing schemes, such as Pradhan Mantri Awas Yojana Urban (PMAY-U) and Pradhan Mantri Awas Yojana Gramin (PMAY-G), have provided significant momentum to the sector, thus enhancing the cement consumption substantially. Under the two phases of PMAY-Urban, more than 122 lakh houses have been sanctioned, of which over 96 lakh houses have been completed and delivered as of November 2025. The scale of construction under PMAY-U has accelerated cement consumption in Tier II and Tier III cities, particularly through vertical housing, redevelopment projects and affordable urban clusters. The Union Budget for FY27 has further strengthened this momentum by allocating Rs 18,625 crore for PMAY (Urban) 2.0, reinforcing the Government’s commitment to expanding affordable housing supply.  PMAY-G, implemented since April 2016, aims to achieve ‘Housing for All’ by 2029 by providing pucca houses with basic amenities to eligible rural households. Against a target of 4.95 crore houses, 4.14 crore units have been allocated, 3.86 crore sanctioned, and 2.93 crore completed by the end of 2025. The budgetary allocation for PMAY-G has increased substantially from Rs 15,000 crore in FY17 to Rs 54,916.70 crore in FY27, reflecting heightened policy emphasis on rural infrastructure and housing development.

Urbanisation to remain a key driver of cement demand: India’s rapid urbanisation, driven by population growth in cities and the expansion of Tier II and Tier III urban centres, continues to underpin cement demand. Urbanisation provides an impetus to housing demand in urban areas as migrants from rural areas require dwelling units. The share of urban population in total population has been consistently rising over the years and stood at about 35 percent in 2020 and expected to reach 37.4 percent in 2025. This trend in urbanisation has pushed the demand for houses in urban areas and, consequently, urban housing cement demand. Nearly 40-42 percent of the country's population is expected to live in urban locations by 2030, which will drive the demand for housing in these areas.
 
Outlook 

Outlook for the Indian cement industry remains positive, with demand underpinned by sustained government investment in infrastructure and affordable housing. Higher capital expenditure by both the central and state governments, particularly on roads, railways, urban infrastructure, and housing projects, is expected to drive cement demand growth. The government in Union Budget 2026 -27 allocated Rs 12.2 lakh crore for capital expenditure/infrastructure development.  Strong real estate activity backed by government housing schemes such as the Pradhan Mantri Awas Yojana is expected to keep cement demand buoyant in coming time.  Further, rapid urbanisation, supported by population growth in cities and the expansion of Tier II and Tier III urban centres, is expected to sustain cement demand in coming future. However, in the near term, the margin of cement companies is expected to decline due to elevated power and fuel costs triggered by ongoing geopolitical tensions in West Asia. The ongoing West Asia conflict has raised global crude oil prices, increasing costs of key inputs such as petcoke, diesel and polypropylene for cement companies, which is likely to weigh on their operating profitability.
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