Modest Capital Spending Hike In Budget Disappoints Cement Industry

Indian cement companies' shares fell after the government announced a 'modest' spending hike for infrastructure projects in the annual budget, which failed to impress investors.

The Indian government said it will spend a record 11.21 trillion rupees ($129.54 billion) on infrastructure in the upcoming financial year that begins on April 1, but the increase in planned spending disappointed markets.

"The capex outlay for fiscal year 2026 looks modest compared to raises made in FY25 and FY24 budget, and misses market expectations slightly," said Amit Anwani, research analyst at Prabhudas Lilladher.

Cement, a key construction material, is a direct beneficiary of government's capital spending. India's infrastructure index reversed gains following the budget announcement, and was last down 1.5%.

"The budget proposals seem to focus a lot on consumption this time around, but the negative surprise has come from the shift of focus on government capex in infrastructure development," said Mirae Asset Sharekhan's Gaurav Dua.

Top cement executives have flagged that government spending hasn't picked up substantially since the national elections in 2024, with volumes growing sluggishly in the third quarter nearly across the board. Cement demand is likely to log single-digit percentage growth in fiscal year 2026, India Ratings and Research said.