The Union budget 2025-2026 sets the foundation for a resilient and progressive nation, with the cement industry poised to play a pivotal role in this transformative journey, says Neetu Vinayek.
India is the second largest cement producer in the world after China. The Economic Survey for 2024-25 mentioned that the current cement industry in India has adequate capacity to meet domestic demand. The Union Budget for fiscal year 2025-2026 solidifies the foundations of India’s infrastructure and economic growth. Government’s strategic focus on infrastructure will stimulate surge in demand for cement in the fiscal year.
The Union Budget’s strategic focus on infrastructure development, with a massive capital expenditure of Rs 11.21 trillion, indicates a bolster for India’s construction sector. One of the strategic initiatives is the establishment of an Urban Challenge Fund with an allocation of Rs 1 trillion, aimed at implementing ‘Cities as Growth Hubs’. This is likely to trigger a wave of construction projects across urban India. Additionally, the government’s proposal to establish the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund 2, with a corpus of Rs 150 billion, is designed to expedite the completion of 100,000 housing units, further boosting the housing sector.
The budget outlines each infrastructure ministry to come up with a three-year pipeline for projects that can be implemented in Public-Private Partnership (PPP) mode. This is complemented by the provision of Rs 1.5 trillion for 50-year interest-free loans to states, earmarked for capital expenditure. These financial injections into the infrastructure domain are poised to create a ripple effect, elevating the demand for cement as a core material in construction and development projects. The budget’s allocations are a clear signal of the government’s commitment to cementing the foundation for sustainable growth and modernisation of the nation’s infrastructure.
The government is set to introduce a national framework to guide states in the establishment of Global Capability Centres (GCCs) in emerging tier II cities. This framework will outline strategies to improve the availability of infrastructure, thereby supporting the growth and development of these cities. Additionally, the government will take active steps to enhance the infrastructure of warehousing for air cargo, ensuring that facilities are upgraded to meet the increasing demands of trade and logistics. These initiatives reflect a commitment to bolstering the nation’s infrastructure and facilitating economic growth across various regions.
Greenfield airports will be launched in Bihar to meet the future needs of the State. These will be in addition to the expansion of the capacity of the Patna airport and the brownfield airport at Bihta.
The ripple effects of these initiatives including infrastructure development systems, urban infrastructure, airport construction etc. will likely stimulate the entire supply chain associated with construction, including the production and supply of cement.
From fiscal policy perspective, the government’s initiative to table the new income-tax bill which is focused on simplification will help the sector adopt clear tax policies and reduce litigation. The budget announced rationalisation of requirements and procedures for speedy approvals for mergers. The scope for fast-track mergers will also be widened and process will be made simpler, this will aid the private sector with acquisitions and increase capacity.
MSME in the sector are also set to gain with increase in limits for qualifying as MSME which will allow better access to capital.
With focus on ease of doing business, the government has recognised that all regulations must keep up with technological innovations and global policy developments. A light-touch regulatory framework based on principles and trust will unleash productivity and employment. The government is working on updating regulations that were made under old laws. High level committees will be set-up to review all non-financial sector regulations, certifications, licenses, and permissions.
From tax perspective, removal of TCS on sale of goods is a welcome move and will reduce compliance burden and provide clarity on purchase of goods transaction. Further, rationalisation of limits for TDS will support MSME sector reduce compliance burden. The government has made serious of amendments for International and Financial Services Centre (IFSC) to promote and develop world-class financial infrastructure in India. It can help companies in the sector raise debt at competitive interest rates and provide access to global funds.
With positive signs for growth, manufacturers are also working towards reducing their carbon footprint and move towards green cement. For this, companies are exploring investments in new technologies, and R&D. The government has announced initiative for private sector driven research, development and innovation with allocation of Rs 200 billion. Manufacturers may seek such incentives and invest in R&D.
The Union budget 2025-2026 is a testament to the government’s integrated approach to fortifying India’s infrastructure. It sets the foundation for a resilient and progressive nation, with the cement industry poised to play a pivotal role in this transformative journey. The initiatives and policy measures announced in this budget are concrete steps toward realizing the dream of a Viksit Bharat@2047.
About the author:
Neetu Vinayek is Partner and Tax Leader – Infrastructure at EY LLP.
