India: Demonetisation policy is expected to reduce cement demand by 15 – 20% until the end of 2016. It will then reduce growth by 3% in the last quarter of the Indian financial year that runs until the end of March 2017, according to a report by Deutsche Bank Markets Research. It added that investors forecast the drop in short-term demand to be ‘severe.’
Research Analyst Chockalingam Narayanan said that he expected demand from infrastructure projects to partially offset weakness in the residential sector. However, investment towards these projects may be impaired where the revenue comes from state government. These bodies rely on up to 10% of their revenue from the property sector that may be adversely effected by demonetisation. Local bodies are responsible for projects such as rural roads, urban development projects, affordable housing, irrigation and more. Larger road and railway budgets are mostly controlled by central government agencies and are expected to be less effected.
