Union Budget 2026-27 Provides Strong Visibility for Cement Sector Growth
Industry representatives and analysts have welcomed the key measures announced in the Union Budget 2026-27, stating they provide clear visibility for continued growth in the cement sector. With the potential for further demand boost as more infrastructure projects are implemented across the country, the sector appears poised for a positive trajectory.
Capital Expenditure Allocation to Sustain Cement Demand
The budget outlines a significant 9% increase in FY26 capital expenditure to ₹12.2 trillion, along with an 11% increase in effective capex, including grants-in-aid, to ₹17.1 trillion. Khushbu Lakhotia, director at India Ratings & Research, emphasized that this substantial allocation is likely to sustain mid-to-high single-digit growth in cement demand. "Given that the infrastructure sector accounts for approximately one-fourth of total cement consumption, these budgetary provisions are crucial," she noted.
Medium-Term Growth Drivers from Urban Infrastructure
While the FY27 capex aligns with expectations, medium-term growth in cement demand is anticipated to stem from urban infrastructure development, particularly in tier-2 and tier-3 cities. The budget proposes an allocation of ₹50 billion per city economic region over five years, which could significantly boost construction activities. "Medium-term demand visibility is further supported by major announcements such as dedicated freight corridors connecting Dankuni in the East to Surat in the West, and the development of seven high-speed rail corridors, especially in the Western and Southern regions," Lakhotia added.
GST Rate Cuts and Recent Volume Pickup
The introduction of GST has already provided much-needed relief to the sector, with tax rates reduced from 25–30% a decade ago to 18%. This reduction has helped boost demand, including in southern India. A.V. Dharmakrishnan, CEO of Ramco Cements, expressed optimism, stating, "If the infrastructure outlay announced in the Budget is fully implemented, cement demand could grow in double digits."
A recent report by Anand Rathi Research highlighted a meaningful pickup in cement 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, including trade and non-trade, in January 2026. Dealers expect these price increases to hold due to firm demand conditions.
Regional Variations and Infrastructure Push
A senior official from a southern cement company pointed out that infrastructure development had slowed across most southern states, except in Andhra Pradesh. There, 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 significantly," the official remarked.
India's Cement Production and Demand Projections
India stands as 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 a 6%–7% growth in cement demand for FY27. Currently, rural housing and infrastructure together account for 50%–55% of total cement consumption, underscoring their critical importance to the sector's health.
Overlooked Segment: Affordable Housing
Despite the positive outlook, analysts noted that the budget overlooked an important area: affordable housing. This segment has lagged behind the overall housing boom witnessed over the past few years, indicating a potential gap that could impact broader sector growth if not addressed in future policies.
