The core story: the second-strongest output performer of ten sectors
Construction Materials ranks 2nd of 10 sectors on IIP level (160.7 in 2025-26, up from a 2012-13 base of 102.9) and 3rd on full-period CAGR (3.49%), behind only Metals on level, and behind Metals and Automotive and Transport Equipment on CAGR. Factories grew from 33,150 to 37,298 (2014-15 to 2023-24), and Gross Value of Output rose 133%, from ₹2.67 lakh crore to ₹6.22 lakh crore, national ASI totals. The sector's firm structure has risen modestly in concentration but stayed comfortably inside the "Competitive" band throughout: HHI rose from 348.3 (2014-15) to 504.5 (2024-25), still less concentrated than Chemicals (HHI 779.0) though more concentrated than Automotive and Transport Equipment (HHI 208.4) as of 2024-25.
That output strength has not translated into an equally strong or steady firm-financial story. PAT margin for tracked firms rose from 3.4% (2014-15) to a COVID-era high of 6.5% (2019-20) before easing back to 5.7% by 2024-25, and ROE similarly peaked in 2021-22 before falling to 6.3%. ROCE tells a steadier story, rising from 9.4% to 11.3% over the decade, and Capital Intensity has held consistently in the 0.81x-1.00x range throughout, reflecting the fixed-asset-heavy nature of cement kilns and glass furnaces. Free Cash Flow, meanwhile, peaked during the low-capex COVID year (2020-21) and has since fallen as capital expenditure has risen. This is a sector where the output index and firm-level returns are telling somewhat different stories, unlike Automotive and Transport Equipment, where both point the same direction, or Textiles, where both diverge in the same downward direction.
Trade: a deficit that has been building for years and is now widening sharply
Unlike Textiles or Automotive and Transport Equipment, Construction Materials is not a net export sector. It has run a trade deficit in five of the last seven years, including every year since 2021-22, and that deficit widened sharply in FY24-25 to ₹22,063 crore as imports grew 16.7% year-on-year against a 0.9% export contraction. Import dependency stands at 55.5%. China is the dominant import partner by a wide margin (₹27,755 crore, more than triple the next partner), though the specific products driving that import bill, natural calcium phosphates and limestone flux, are raw mineral inputs rather than finished construction materials, a different signature from the finished-goods import pattern seen in Electronics. Provisional FY25-26 figures show the deficit widening further still.
Investment: an entirely private-capital story, with no PLI layer
New investment in Construction Materials is almost completely private-sector-funded: Indian Private Sector investment reached ₹72,483 crore in 2024-25, essentially the sector's entire ₹72,622 crore new-investment total, with Foreign Private negligible (₹139 crore) and government investment not registering a value in this indicator in recent years. Unlike Chemicals, Electronics, or Automotive and Transport Equipment, no Production Linked Incentive scheme covers this sector's NIC scope (wood products, non-metallic mineral products including cement/glass/ceramics, and furniture). The investment pipeline shows both new investment and dropped-project value rising together in 2024-25: announced investment at a decade high of ₹72,622 crore, dropped investment more than doubling to ₹40,017 crore, both expanding in the same year.
Geography: Gujarat's scale, Rajasthan's mineral base, a less concentrated map than most sectors
Gujarat leads by a wide margin (18.6% of national GVO, ₹1,15,587 crore), with Rajasthan a clear second (11.8%, ₹73,085 crore), a pairing that reflects the two states' limestone, marble and sandstone reserves underpinning cement and dimension-stone production. Maharashtra, Tamil Nadu and Andhra Pradesh round out the top five, each in the 6.8-8.5% range. The top-5 states together account for only around 53% of national output, a notably less concentrated geography than Textiles (~65%) or Automotive and Transport Equipment (~75.5%), consistent with a sector whose core mineral and timber inputs are more widely distributed across the country. Andhra Pradesh stands out for having nearly as many factories as Gujarat (4,946 vs 4,124) while capturing the smallest GVO share of the top five, suggesting a larger number of smaller-scale operations rather than a concentration of large plants.
Clusters: three named single-product hubs
Construction Materials has three profiled clusters, each a specific single-product hub: Morbi in Gujarat (~450 MSMEs, ceramics and vitrified tiles), Asansol-Burnpur in West Bengal (206 refractory-product units serving Durgapur Steel Plant and other large industrial buyers), and a Maharashtra-wide network of roughly 17,000 clay-fired brick kilns producing an estimated 28 billion bricks a year. Morbi's export orientation is explicitly recorded as "No" in its cluster profile, meaning Gujarat's dominant GVO share (18.6% of the national total, see Geography) reflects a domestic-market cluster rather than an export-facing one, a contrast with export-oriented clusters like Tiruppur or Sriperumbudur seen in other sectors.
R&D: a low, flat laggard
R&D spend as a share of sales has held in a narrow 0.08%-0.10% band across the entire decade, closing at 0.081% in 2024-25, squarely in the "laggard" band (below 1%) with no meaningful upward or downward trend. This is consistent with a sector whose competitiveness runs through scale economies, energy-cost management (power & fuel is 15.07% of sales, the highest cost-structure line of any sector reviewed in this series after raw materials), and logistics, rather than product innovation.
Explore the sector: interactive mindmap
Construction Materials is the second-strongest output performer by IIP level in this ten-sector series, with steady factory growth, a firm structure that has stayed comfortably competitive even as concentration has risen modestly, and capital returns (ROCE 9.4%→11.3%) that have improved steadily even where margin-based returns have not. That headline strength sits alongside real open questions: PAT margin and ROE have eased back since a COVID-era peak even as ROCE improved, the sector's trade position has slipped into a persistent and now widening deficit, and there is no PLI scheme covering this sector's NIC scope. None of these undercut the output growth story, but they are the areas that deserve the closest attention.
References
Methodological Notes
Institute of Manufacturing and Economy · Sector Snapshots · August 2026 · NIC Divisions 16, 23, 31 · Primary research and compilation: Riddhi Bhargava
Author's Profile
Riddhi Bhargava is an analyst at the Institute of Manufacturing and Economy. She conducted the primary research for this sector snapshot and compiled the Sector Snapshots series.