Indian Construction Industry
Encyclopedia
The evolution of Indian Construction Industry was almost similar to the construction industry evolution in other countries : founded by Government and slowly taken over by enterprises. After independence the need for industrial and infrastructural developments in India laid the foundation stone of construction, architectural and engineering services.
The period from 1950 to mid 60’s witnessed the government playing an active role in the development of these services and most of construction activities during this period were carried out by state owned enterprises
and supported by government departments. In the first five-year plan
, construction of civil works was allotted nearly 50 per cent of the total capital outlay.
The first professional consultancy company, National Industrial Development Corporation
(NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design engineering and construction companies were set up in the public sector (Indian Railways
Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES
), Engineers India Limited
(EIL), etc.) and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.).
In the late 1960s government started encouraging foreign collaborations in these services. The Guidelines for Foreign Collaboration, first issued in 1968, stated that local consultant would be the prime contractor
in such collaboration.
The objective of such an imposition was to develop local design capabilities parallel with the inflow of imported technology and skills. This measure encouraged international construction and consultancy organisations to set up joint venture
s and register their presence in India.
In India Construction has accounted for around 40 per cent of the development investment during the past 50 years. Around 16 per cent of the nation's working population depends on construction for its livelihood. The Indian construction industry employs over 3 crore people and creates assets worth over 20,000 crore.
It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital formation
. Total capital expenditure
of state and central govt. will be touching 8,02,087 crores in 2011-12 from 1,43,587 crores (1999-2000).
The share of the Indian construction sector In total gross capital formation (GCF) came down from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 48 per cent in 1993-94 and stood at 44 per cent in 1999-2000. In the 21 st century, there has been an increase in the share of the construction sector in GDP and capital formation.
GDP from Construction at factor cost
(at current prices) increased to 1,74,571 crores (12.02% of the total GDP ) in 2004-05 from 1,16,238 crores (10.39% of the total GDP) in 2000-01.
The main reason for this is the increasing emphasis on involving the private sector infrastructure development through public-private partnership
s and mechanisms like build-operate-transfer
(BOT), private sector investment has not reached the expected levels.
The Indian construction industry comprises 200 firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies. There are thousands of small contractors, which compete for small jobs or work as sub-contractors of prime or other contractors. Total sales of construction industry have reached 42,885.38 crores in 2004 05 from 21,451.9 crores in 2000-01, almost 20% of which is a large contract for Benson & Hedges
.
Future Challenges
The Indian economy
has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the required extent of increasing growth rate up to the tune of 8 to 10 per cent. The Union Government has underlined the requirements of the construction industry.
With the present emphasis on creating physical infrastructure
, massive investment is planned in this sector. The Planning Commission has estimated that investment requirement in infrastructure to the tune of about 14,50,000 crore or US$320 billion during the 11th Five Year Plan
period.
This is a requirement of an immense magnitude. Budgetary sources cannot raise this much resources. Public Private Partnerships (PPP) approach is best suited for finding the resources. Better construction management
is required for optimising resources and maximising productivity and efficiency.
Disclaimer : The article is still in process of editing and more facts and figures would be added.
Sources : Public information published by Construction Industry Development Council, Planning Commission of India
, Ministry of Statistics and Programme Implementation and writers original works.
The period from 1950 to mid 60’s witnessed the government playing an active role in the development of these services and most of construction activities during this period were carried out by state owned enterprises
Government-owned corporation
A government-owned corporation, state-owned company, state-owned entity, state enterprise, publicly owned corporation, government business enterprise, or parastatal is a legal entity created by a government to undertake commercial activities on behalf of an owner government...
and supported by government departments. In the first five-year plan
First Five-Year Plan
The First Five-Year Plan, or 1st Five-Year Plan, of the Union of Soviet Socialist Republics was a list of economic goals that was designed to strengthen the country's economy between 1928 and 1932, making the nation both militarily and industrially self-sufficient. "We are fifty or a hundred...
, construction of civil works was allotted nearly 50 per cent of the total capital outlay.
The first professional consultancy company, National Industrial Development Corporation
Development Corporation
In England and Wales, Development Corporations are bodies set up by the UK government and charged with the urban development of an area, outside the usual system of Town and Country Planning in the United Kingdom...
(NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design engineering and construction companies were set up in the public sector (Indian Railways
Indian Railways
Indian Railways , abbreviated as IR , is a departmental undertaking of Government of India, which owns and operates most of India's rail transport. It is overseen by the Ministry of Railways of the Government of India....
Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES
Rite
A rite is an established, ceremonious, usually religious act. Rites in this sense fall into three major categories:* rites of passage, generally changing an individual's social status, such as marriage, baptism, or graduation....
), Engineers India Limited
Engineers India Limited
Engineers India Limited is a public-sector undertaking of the Government of India under the Ministry of Petroleum and Natural Gas. It was initially set up in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects...
(EIL), etc.) and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.).
In the late 1960s government started encouraging foreign collaborations in these services. The Guidelines for Foreign Collaboration, first issued in 1968, stated that local consultant would be the prime contractor
General contractor
A general contractor is responsible for the day-to-day oversight of a construction site, management of vendors and trades, and communication of information to involved parties throughout the course of a building project.-Description:...
in such collaboration.
The objective of such an imposition was to develop local design capabilities parallel with the inflow of imported technology and skills. This measure encouraged international construction and consultancy organisations to set up joint venture
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
s and register their presence in India.
In India Construction has accounted for around 40 per cent of the development investment during the past 50 years. Around 16 per cent of the nation's working population depends on construction for its livelihood. The Indian construction industry employs over 3 crore people and creates assets worth over 20,000 crore.
It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital formation
Capital formation
Capital formation is a concept used in macroeconomics, national accounts and financial economics. Occasionally it is also used in corporate accounts. It can be defined in three ways:...
. Total capital expenditure
Capital expenditure
Capital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year...
of state and central govt. will be touching 8,02,087 crores in 2011-12 from 1,43,587 crores (1999-2000).
The share of the Indian construction sector In total gross capital formation (GCF) came down from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 48 per cent in 1993-94 and stood at 44 per cent in 1999-2000. In the 21 st century, there has been an increase in the share of the construction sector in GDP and capital formation.
GDP from Construction at factor cost
Factor cost
Factor cost has the following uses in economics:*Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of production, instead of market prices...
(at current prices) increased to 1,74,571 crores (12.02% of the total GDP ) in 2004-05 from 1,16,238 crores (10.39% of the total GDP) in 2000-01.
The main reason for this is the increasing emphasis on involving the private sector infrastructure development through public-private partnership
Public-private partnership
Public–private partnership describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies...
s and mechanisms like build-operate-transfer
Build-Operate-Transfer
Build-own-operate-transfer or build-operate-transfer is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract...
(BOT), private sector investment has not reached the expected levels.
The Indian construction industry comprises 200 firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies. There are thousands of small contractors, which compete for small jobs or work as sub-contractors of prime or other contractors. Total sales of construction industry have reached 42,885.38 crores in 2004 05 from 21,451.9 crores in 2000-01, almost 20% of which is a large contract for Benson & Hedges
Benson & Hedges
Benson & Hedges is a British brand of cigarettes owned by the Gallaher Group, which became a subsidiary of Japan Tobacco in 2007. They are registered in Old Bond Street in London, and are manufactured in Lisnafillen, Ballymena, Northern Ireland for the UK and Irish markets.-History:Benson & Hedges...
.
Future Challenges
The Indian economy
Economy of India
The Economy of India is the ninth largest in the world by nominal GDP and the fourth largest by purchasing power parity . The country is a part of the G-20 major economies and the BRICS, in addition to being partners of the ASEAN. India has a per capita GDP of $3,608 as per 2010 figures, making it...
has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the required extent of increasing growth rate up to the tune of 8 to 10 per cent. The Union Government has underlined the requirements of the construction industry.
With the present emphasis on creating physical infrastructure
Infrastructural capital
Public capital is the aggregate body of government-owned assets that are used as the means for private productivity. Such assets span a wide range including: large components such as highways, airports, roads, transit systems, and railways; local, municipal components such as public education,...
, massive investment is planned in this sector. The Planning Commission has estimated that investment requirement in infrastructure to the tune of about 14,50,000 crore or US$320 billion during the 11th Five Year Plan
Five-Year Plans of India
The economy of India is based in part on planning through its five-year plans, which are developed, executed and monitored by the Planning Commission. The tenth plan completed its term in March 2007 and the eleventh plan is currently underway...
period.
This is a requirement of an immense magnitude. Budgetary sources cannot raise this much resources. Public Private Partnerships (PPP) approach is best suited for finding the resources. Better construction management
Construction management
Construction Project Management is the overall planning, coordination and control of a project from inception to completion aimed at meeting a client’s requirements in order to produce a functionally and financially viable project that will be complete mingement is project management that applies...
is required for optimising resources and maximising productivity and efficiency.
Disclaimer : The article is still in process of editing and more facts and figures would be added.
Sources : Public information published by Construction Industry Development Council, Planning Commission of India
Planning commission of India
The Planning Commission is an institution in the Government of India, which formulates India's Five-Year Plans, among other functions.-History:...
, Ministry of Statistics and Programme Implementation and writers original works.