India's Infrastructure Output Shrinks as the Nationwide Shutdown Hits Productivity

India's Infrastructure Output Shrinks as the Nationwide Shutdown Hits Productivity

As the nation moves towards mass lockdown to combat the novel coronavirus pandemic, the infrastructure industry in India is experiencing the critical effects on its production level. The nationwide shutdown imposed in India, following the outbreak of novel coronavirus, has directly affected the infrastructure sector in the region, especially in the production areas of steel and cement. It has been over a month since the official lockdown started in the country, and this has led to the closure of various production facilities. All of this has significantly affected the March infrastructure output in the region, which is steadily plunging.  

According to the estimates, the annual infrastructure output saw an upward growth of 7.1% in February, which slumped by 6.5% in March, and is expected to witness a further dip in the next month. The annual infrastructure output comprises nearly 40% of the regional industrial output.

As the large parts of the manufacturing sector is inactive and is expected to be in the same state for an extended period, the production rate of the materials required in the infrastructure industry is also dipping. The disruption of the supply chains for procuring raw materials and the absence of workforce are the major factors impacting the industry.

Cement production decreased by 24.7% in March, while the steel output contracted to 13%, and witnessed a downfall in demand. The various energy sources, which are utilised in the construction sector to operate the heavy machineries, are also experiencing a significant dip. For instance, electricity generation plunged to 7.2% in the month of March.

India's loss of economic activity could reach as high as $234 billion under lockdown, which can result in zero percent GDP growth this fiscal year. The world's biggest lockdown might have cost the Indian economy Rs 7-8 lakh crore amidst the period of 21 days. Factors like factories halting production, several flights being suspended, several trains being cancelled contributed to this much amount of money. The lockdown may cost the Indian economy almost USD 4.64 billion (over Rs 35,000 crore) every single day.

Since most of the metropolitan cities like Delhi, Mumbai, Ahmedabad, and Pune, which are the hub of construction and infrastructure activities in the region, are still entirely closed and fall in the category of red zone, relaxations offered during the lockdown period may not make any material impression on the slowing infrastructure sector in the region.

While lockdown has been imposed to prevent the spread of COVID in the country, it has significantly impacted the region’s infrastructure industry and its output. The scenario might get worse in the months of April and May as the lockdown is expected to extend further with significant parts of the production remaining inactive for a prolonged period., halting almost all the economic activities in the region. In fact, there are chances that the economic growth of the country will be sluggish, even when everything comes back to normal.
Since the imposition of lockdown, which has halted the operations almost completely, the companies who were supposed to work on big projects have cancelled the same, which will directly affect their annual sales and the infrastructure sector. While projects under development have been delayed only by two to three months, it has been estimated that the overall impact of the novel coronavirus on the construction industry in India is INR 30,000 crore per day. Moreover, the investment in construction-related projects is likely to reduce by 13 to 30% owing to the fear of disruption in the supply chain or increased prices of raw material, which will further impact the Gross Value Added and employment in the country.

The pandemic has impacted the infrastructure projects to a large extent, which are the driving force for the infrastructure industry. The demand and production of the vital raw materials in the construction sector, that is, cement and steel are further expected to be hit by the current levels of uncertainty, inactivity of business, loss of income and the diversion of government funds towards the management of the pandemic.
Today, India needs to renew its focus on the infrastructure sector in the wake of the damage caused by COVID-19. The government and the nation need to acknowledge the negative impact of the coronavirus on the infrastructure industry and manage the situation accordingly. The development and continuation of the highway construction projects in different phases could help the infrastructure sector get back to normal and sustain during this difficult time, which could further help the migrant labourers, daily wages workers, and the economy to grow.