In any industry, it always helps to take into account the macro perspective as it aids one in navigating the broader economic trends. As per the assessments of the April-June quarter (Q1), India’s gross domestic product (GDP) increased 13.5 per cent, which was lower than RBI’s estimated 16.2 per cent. A fiscal deficit of Rs 3.41 trillion was noted during the April-July period this financial year.
Moody’s Investors Service has revised India’s economic growth projection for 2022 to a reduced 7.7 per cent. The downward revision is due to rising interest rates, an uneven monsoon and global demand slowdown, which is not surprising as the Russia-Ukraine war continues to cast its shadow. The eight core infrastructure sectors, including cement, slowed down to 4.5 per cent in July, which afforded the service sector to shine in the first quarter.
Taking a bird’s eye view of the cement sector, the upward moving trends are looking promising and that has kept optimism buoyed amongst the players. Monsoon is a tricky time for the cement industry as construction takes a backseat and price fluctuations in cement are rife.
As per Kotak Institutional Equities report, cement prices have declined about a percent sequentially in the second quarter. Cement price was recorded at Rs 384 per 50 kg bag in August pan-India. In spite of a sluggish season, the demand is likely to soar in the coming months, and the key players in the industry are anticipating robust growth.
There is a lot that’s underway for cement manufacturers in terms of alternative raw materials, energy efficiency and eco-friendly processes. Given the infrastructure and construction boom that India is witnessing today, the cement segment is likely to perform well. However, the challenges that the sector faces are unique to it, and it remains to be seen how cement brands will innovate to overcome them.