Chennai: The key measures announced in the Union Budget 2026-27 provide visibility for continued growth in the cement sector, with potential for further demand boost as more projects are implemented, said industry representatives and analysts.The budget provides for a 9% increase in FY26 capital expenditure to ₹12.2 trillion and an 11% increase in effective capex (including grants-in-aid) to ₹17.1 trillion. “This is likely to sustain mid-to-high single-digit growth in cement demand, given that the infrastructure sector accounts for around one-fourth of total consumption,” said Khushbu Lakhotia, director, India Ratings & Research.While the FY27 capex is in line with expectations, medium-term growth in cement demand is expected from urban infrastructure development, particularly in tier-2 and tier-3 cities, with a proposed allocation of ₹50 billion per city economic region over five years. “Medium-term demand visibility is also supported by announcements such as: (a) dedicated freight corridors connecting Dankuni in the East to Surat in the West, and (b) development of seven high-speed rail corridors, particularly in the West and South,” she added.The introduction of GST had already provided much-needed relief, with tax rates reduced from 25–30% a decade ago to 18%, helping boost demand, including in southern India. “If the infrastructure outlay announced in the Budget is fully implemented, cement demand could grow in double digits,” said A.V. Dharmakrishnan, CEO, Ramco Cements.A recent report by Anand Rathi Research highlighted a meaningful pickup in volumes from December 2025, aided by factors such as the recent GST rate cuts and a favourable base effect following two subdued years. Companies have also announced price hikes across regions and customer segments (trade and non-trade) in January 2026, which dealers expect to hold due to firm demand.A senior official of a southern cement company noted that infrastructure development had slowed across southern states, except in Andhra Pradesh, where the state government’s ambitious Amravati project is reportedly driving some demand. Any new push in infrastructure development in the region is therefore expected to spur cement volumes.India is the world’s second-largest cement producer after China, with an annual installed capacity of 690 million tonnes and production of around 453 million tonnes in FY25. Rating agency ICRA projects 6%–7% growth in cement demand for FY27. Currently, rural housing and infrastructure together account for 50%–55% of consumption, highlighting their importance to the sector.However, analysts noted that the budget overlooked an important area: affordable housing. This segment has lagged behind the overall housing boom of the past few years.
