Housing for all could provide Indian economy with much-needed stimulus

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Housing for all could provide Indian economy with much-needed stimulus
A worker grinds a metal window grill at a steel and iron manufacturing unit in Ahmedabad, India. The expected spurt in housing construction can boost production of steel, cement, building materials, logistics and, consequently, employment.Courtesy: Reuters

The Covid-19 outbreak has delayed the implementation of the Modi government’s ambitious programme to provide every Indian with a brick and mortar house by 2022. But making up for the backlog of unfinished houses could provide a huge fillip to the steel, cement, logistics and 250 other sectors.

There’s a huge stimulus coming the way of the Indian economy. Ironically, it is the implementing of the Pradhan Mantri Awas Yojana-Gramin (PMAY-G or Prime Minister’s Housing for All Programme-Rural) in previous years that could provide ballast to the economy at a time when a second wave of the Covid-19 pandemic is threatening the robust demand and consumption revival seen in India in the last couple of quarters.

Within a couple of years of coming to power in New Delhi, Prime Minister Narendra Modi had launched a flagship programme, Pradhan Mantri Awas Yojana (PMAY), on April 1, 2016, to provide a brick and mortar house with basic amenities like a toilet with piped water and kitchen with cooking gas to every last Indian.

The initiative had two components, an urban programme to provide housing to the urban poor and a rural component meant for India’s vast rural population. The latter has a target of building and delivering 29.5 million housing units to as many rural households by 2022.

The Covid-19 outbreak, the assembly elections… have slowed down the rollout of this ambitious scheme. Till March 31 this year, it was struggling to achieve 50% of its target.

Covid-19, other factors delayed implementation

But a combination of factors – including the Covid-19 outbreak, the assembly elections in four states and one Union Territory, some procedural factors and bureaucratic delays – have slowed down the rollout of this ambitious scheme. Till March 31 this year, 50 per cent of the target was achieved, with only 13.5 million units ready so far.

Modi government directs states to cut the slack

The Modi government has taken cognisance of this development. It has directed various state governments to speed up the process of allotting land to households that do not own any land and hasten the pace of completion of houses.

“The Modi government takes great pride in its execution capabilities. It has taken on humungous social welfare projects since coming to power and successfully seen them through. Examples abound – schemes like Jan Dhan Yojana, the world’s largest financial inclusion scheme, Swacch Bharat Abhiyan (Clean Indian Mission) to provide every Indian household with a toilet and the initiative to provide the poor with free cooking gas connections – and these are frequently cited by multilateral bodies like the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB) as programmes that other countries should emulate. Given this stellar track record, failure to meet the PMAY-G targets is not an option for the Indian government,” said a senior retired bureaucrat on condition of anonymity.

This delay in meeting PMAY-G targets could be a blessing in disguise for India, which is suddenly seeing dark clouds in the form of a rising second wave of Covid-19 infections.

13 states account for 99 per cent of delays

Official data shows that states like West Bengal, Tamil Nadu, Assam, Gujarat, Rajasthan, Chhattisgarh, Madhya Pradesh, Maharashtra, Odisha, Jharkhand, Uttar Pradesh, Bihar, Jammu & Kashmir are mainly responsible for the programme being behind schedule. These 13 states account for 99 per cent of the delays.

Ambitious execution challenge

This means the government has to meet a very stiff execution objective this year to ensure that the scheme meets its target within the scheduled deadline. Even under normal circumstances, i.e., if the programme had been in schedule, it would have had a stiff target of building 7.8 million houses this year. The shortfall in meeting previous year’s targets means the strike rate has risen to a very challenging 16.5 million units.

Due to Covid-19 and the resultant lockdown, only 451,000 housing units could be built during the previous financial year, against the target of 5.84 million houses. In fact, the figure for last year is the lowest since 2016-17 when 3.25 million houses were built.

Blessing in disguise

However, some analysts are of the opinion that this delay in meeting PMAY-G targets could actually be a blessing in disguise for the Indian economy, which is suddenly seeing dark clouds gather over the horizon – in the form of a rising second wave of Covid-19.

At a time when some states in India have already declared partial lockdowns and others like Maharashtra are considering imposing complete shutdowns to tackle the rising incidence of coronavirus cases, the expected spurt in housing construction, as a result of the government pushing to clear the backlog in PMAY-G targets, can provide a huge fillip to industries such as steel, cement, building other materials, logistics and consequently, to employment generation across the country.

Laborers wear protective face mask as they work in an industrial unit engaging in manufacturing of essential services. About 250 sectors draw their sustenance directly from the health of the construction sector.
Laborers wear protective face mask as they work in an industrial unit engaging in manufacturing of essential services. About 250 sectors draw their sustenance directly from the health of the construction sector.Courtesy: ANI

Construction sector has massive linkages

The construction sector has among the highest upstream and downstream linkages with other related sectors of the economy. About 250 sectors draw their sustenance directly from the health of the construction sector.

The expected rise in spending will lead to incremental demand for several million tonnes of steel, cement… and help generate millions of additional man days of work.

The expected rise in spending – on account of the 16.5 million dwelling units to be constructed – will lead to incremental demand for several million tonnes of steel, cement, sand, wood, paint and cables as well as provide a boost to the commercial transport sector and help generate millions of additional man days of work both in the organised and unorganised sectors.

Workers unloading cement from vessels as the First trial vessel with cement from Bangladesh reached Sonamura port. Thanks to the government’s housing programme demand for cement will rise by 20 percent in the current fiscal.
Workers unloading cement from vessels as the First trial vessel with cement from Bangladesh reached Sonamura port. Thanks to the government’s housing programme demand for cement will rise by 20 percent in the current fiscal.Courtesy: ANI

Cement demand likely to rise 20 per cent this fiscal

A recent research report by ratings firm ICRA has said India’s cement demand is expected to rise 20 per cent in the current fiscal. A major driver of this demand rebound will be the government’s affordable housing programme. This, in turn, will improve the sector’s capacity utilisation to 64 per cent, up sharply from 56 per cent last year.

“Such growth shall be supported by rural demand, including affordable housing and recovery in the infrastructural sector. Rural offtake is expected to get supported by positive farm sentiments with timely sowing of Rabi crops and favourable reservoir and groundwater levels, which are likely to result in higher Rabi yields. The traction in the PMAY-G is also predicted to continue,” said a report in www.99acres.com, a leading Indian real estate website.

At a time when demand could begin to falter once again, this boost in consumption across a host of important sectors could well be the difference between a year of economic recovery and another year lost to the Covid-19 virus.

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