While the demand for cement has been languishing for a couple of years now because of the economic slowdown, there?s some hope now that it will rebound given the good monsoon this year which is likely to boost rural income. Moreover, previous trends have shown pre-election spending and infrastructure development boosts demand for cement one year each, before and after the elections as the political parties in power speed up development work to woo voters.
With five states going for polls this month and the general elections due next year, analysts expect that cement demand would improve considerably given the pre-election spending.
A Barclays study on state-wise cement consumption growth reflects the trend. In Rajasthan,for example, in FY09, the demand growth was 13% before election and 6.3% after polls. Cement demand in the state has already picked up as elections are due this month. Similarly, cement demand has picked up in Madhya Pradesh, Chhattisgarh and Delhi?all three go to polls later this month.
Some trends are visible as the eight core industries having a combined weight of 37.9% in the Index of Industrial Production (IIP) recorded 8% growth in September 2013, posting the highest growth in the last 12-months. Cement production increased by 11.5% year-on-year in September and its cumulative growth during April to September, 2013-14 was 4.5% over the corresponding period of previous year.
Barclays expects cement demand to grow from 3.6% in FY14 to 7.1% in FY15 and a recovery in rural housing demand, on the back of rising rural incomes would reflect with a lag of two to three quarters.
