Indian cement sector to grow 7% in FY16 : ICRA

However, capacity utilisation is likely to remain moderate at 72%

India's cement industry is likely to grow by 6.8-7 per cent in 2015-16, according to report by rating agency ICRA. The report said that cement demand will improve gradually in the medium term in line with recovery in infrastructure, investment cycle and overall economy.

In 2014-15, the all India cement production grew by 5.6 per cent, an improvement over the growth of 3 per cent in FY14. However, on the capacity utilisation front, sector is likely to see continued moderation at 72 per cent for the current financial year. But the report added that it expect it to improve to 77 per cent in FY17, driven by both pick-up in demand as well as slowdown in fresh capacity addition.

Cement demand has remained sluggish post monsoon with all-India cement production increasing by merely 1.8% during October, 2014 to March 2015 period as against 9.7 per cent during Apr-Sept 2014. While pre-election spending and delayed monsoon had supported the growth in cement demand in H1 FY15, the growth slowed down in H2 FY15 once the election cycle was over.

Thus far in the current financial year the demand has continued to remain subdued in with cement production growing by merely 0.1% during Apr-May 2015.

Sabyasachi Majumdar, senior vice president, ICRA, said: "Cement demand was also impacted by cut down in government spending in Q4 FY15, muted demand from real estate and construction projects and slow recovery in infrastructure spending. Further, decline in kharif crops production owing to poor monsoons affected agricultural incomes and post-monsoon rural demand for cement for housing and other purposes. Regional factors such as extension of monsoon in South, extremely cold weather in North India and unseasonal rains in North in Q4FY15 also affected construction activities and consequently cement demand in some areas. The situation persists in Q1FY16, with demand remaining subdued during April-May 2015."