India's moderation of construction and infrastructure activity

The infrastructure and construction sector, including real estate, has been slowing down, mirroring the overall economic slump. In absence of credible high-frequency indicators, the impact of policy changes on this sector has been difficult to capture but the registrations of vehicles used for construction and real estate activities, such as excavators, bulldozers, construction equipment vehicles, and earth-moving vehicles, can be used as a proxy measure.

The overall registrations of these vehicles had been declining since October 2018, reflecting the slowdown in the sector. In addition, the negative impact of COVID-19 outbreak is evident from the consecutive declines in the total vehicle registrations in April and May. In August, there was a turnaround in the growth rate of construction vehicles which further increased by 71.5% y/y in September 2020, almost matching the level in October 2018.

This could be a possible effect of the fiscal stimulus rolled out towards infrastructure development. Registrations of earthmoving equipment, the class of vehicle that forms the largest part of the vehicles under this sector, witnessed a rise in the more affluent states such as Punjab, Kerala, Tamil Nadu, and Gujarat. However, in terms of actual data, Uttar Pradesh, Rajasthan, Tamil Nadu, and Karnataka have occupied the largest share in registrations of earthmoving equipment from January to November 2020.

Punjab, having one of the highest growth rates of registration, has seen a fall in the share of the total, while Rajasthan, Tamil Nadu, Karnataka, Haryana, and Kerala have increased their share. Despite the increase in a few states, the overall registrations declined once again in November 2020 by 8.7% y/y showcasing the moderation of the sector and meeting its long term averages, six months post unlocking of the economy.

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