There are two ways to look at this. First, increasing construction activity gives the picture of more employment, more consumption of cement, steel and the like. This will generate demand in the economy. Second, infrastructure will account for a large part of the construction activity. More roads, better ports et cetera will benefit the economy by supporting a higher level of economic activity.
Lower rates impact the economy in several ways.
One cost of capital declines, thus improving profitability and making investment activity relatively more attractive. Two, lower borrowing costs support a higher level of consumption activity as financing costs decline. But the small size of the overall construction sector and the recent cut in interest rates may not have an immediate impact on growth. However, as lower rates trickle to the bottomline and spur investment activity and the construction industry gains momentum, India stands to benefit significantly. Quantum Information Services Ltd. All rights reserved.