New Delhi: The construction sector's share in India's overall gross value added (GVA) declined to 7.4 per cent in the financial year 2017-18 (FY18) from 9.6 per cent in FY12 owing to poor demand in the real estate sector and lower capital expenditure, said a report on Tuesday.
The joint report by Assocham and ICRA, titled "EPC Contracting - Efficiency in Infrastructure Creation", said over the last five to seven years, growth in construction GVA has been lower than the growth in overall GVA.
"Weakness in aggregate capex (capital expenditure) together with subdued real estate demand has resulted in decline in share of construction sector in India's gross value added from 9.6 per cent in FY12 to 7.4 per cent in FY18," it said.
The construction sector with a GVA worth Rs 10.6 trillion (FY17) is of significant importance to Indian economy as it plays a major role in economic growth, provides major employment and occupies a pivotal position in country's development plans, as per the report.
The study further revealed that while public sector capital expenditure picked up in the past few years, private sector's capital expenditure growth was weak due to "issues faced in land acquisition, approvals, deferral of capex plans and overall subdued business confidence".
"The construction activity is highly dependent on government policies as part from direct projects awarded by the government institutions and approval of clearances are a must for smooth functioning of the industry," observed the report.
It, however, said that the Centre has increased focus on infrastructure projects evidently as it has increased allocation towards infrastructure in the last three budgets and has also taken steps to improve the regulatory environment and funding avenues.
"Major opportunities for EPC (engineering, procurement and construction) players are expected over next 3-5 years in railways, roads and Metro rail segments.