Construction sector – The emerging avatar for Indian economy

The silver lining of being a developing nation is that, there is an immense scope and potential that the nation stores in itself to unravel. One such potential of scope can be observed in that of the construction sector. The scope of construction activities is so vast and extensive that cannot even be imagined appropriately at this juncture.

Construction sector contributes about 5 percent to the GDP and about 78 percent to the nation gross capital formation.

Construction sector has the ability of providing huge employment opportunities to the people. Moreover, the employment need not to be highly skill-based, which is mostly the requirement of the service sector. This exactly fits into the employment scenario of India, where majority of the population is illiterate.

The geographical distribution of India makes the effective infrastructure development not an option, rather a necessity. In the short-time period, the investment in the construction sector seems not to be profitable, but in the long run, this sector has the immense potential to run dividends for the economy in the form of economies of scale.

If one delves deeper and carefully analyse, the myriad of ills can be attributed to the inefficient and inadequate construction sector. Take for instance, the case of inflation, the improper and inadequate road networks around the nation adds to the travelling cost which further gets reflected in the price of the transported products. As the variety of products are not confined to the single location, the transporting of the products becomes imperative which thereby suffered on account of the inadequate road and transport network.

Numerous studies indicated that there is strong correlation between the high construction growth and high economic growth. Construction sector stimulates growth in the form of “multiplier”, as emphasised by Keynes long back ago. Further, the construction sector is a function upon the lot many variables that penetrates the different sectors of the economy. Therefore, the positive impact of this sector is multidimensional in nature.

Government has served many incentives to the sector in the form of smart cities, industrial corridors, railway station/lines, mega ports, etc. These initiatives, if implemented properly, will propel the growth of the nation to the higher levels. The problem of unequal development can very much be addressed by this sector. The setting up of any construction plant in an area will set up the economic system that will be self-sustaining in nature. Such economic systems will be interdependent in nature and such interdependency will lead in to the emergence of the ‘domino effect’.

The sector has experienced a huge blow during the pandemic, which has manifested itself in the loss of employment opportunities for lot many people. The importance of investment in this sector now turns out to be more imperative. Technological process is one of the offshoots of the construction sector, and various exogenous growth models has already outlined the increased importance of the technological progress in the progress and prosperity of nation.

One of the prime concerns in the development of this sector is the uneven and biased distribution of resources. Such concern should be addressed properly by building up the concept of the rural infrastructure. Developing the rural infrastructure will impact positively more in comparison to the urban infrastructure for the simple fact that, the people in the rural sector are more in comparison to the urban sector. This paves the way for the high consumption level which stimulates the concept of the ‘multiplier’ at more progressive levels.

No doubt that the nation has to develop at the various fronts, but the construction sector is one, that should be at the centre stage, for the simple fact that, all other activities revolve only and only this fulcrum.

About the author


My name is Vipal Bhagat, going to be doctorate in applied economics. My aim is to analyse and interpret the current economic happenings around us, according to the core and basic principles of economics.

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