The Indian cement industry is set to experience demand growth of 6–7.5% in FY26, as per a detailed analysis by Systematix Research. This growth will be primarily driven by ongoing consolidation, policy discipline, and a recovery in both infrastructure development and the housing sector. This comes after the sector ended FY25 with a healthy 11% increase in cement volumes, overcoming a relatively weak first half.

The turnaround in demand was largely powered by a combination of increased government capital expenditure and faster execution of public and private projects. According to the report, the industry's total cement production capacity reached approximately 655 million tonnes per annum (MTPA) by the end of FY25, representing a 4.8% year-on-year growth.

In May 2025, cement companies attempted price hikes ranging from Rs. 5 to Rs. 10 per bag (roughly US$ 0.058 to US$ 0.12) across various regions. However, the success of these hikes varied significantly by geography due to regional climate challenges and economic conditions. For instance, early monsoon onset in Eastern India coupled with heat waves in the Southern regions resulted in subdued demand, restricting the pass-through of price increases.

Regional Trends in FY25 and Projections for FY26

• Eastern India: Saw a sharp decline in cement demand, despite companies hiking prices by as much as Rs. 46 (US$ 0.54) per bag.

• Southern India: Demand remained flat; hence price hikes were postponed to Q2 FY26 in anticipation of better market conditions.

• Central India: A modest Rs. 2 (US$ 0.023) per bag increase was implemented, reflecting relatively neutral demand trends.

• Northern India: This region recorded stronger price traction, with hikes ranging between Rs. 20–30 (US$ 0.23–0.35) per bag.

These region-specific dynamics helped push up the average cement price in India by 1.6% month-on-month in May 2025, taking the national average to Rs. 367 (US$ 4.29) per bag.

Capacity Utilisation and Profitability

Systematix Research emphasizes that improved capacity utilisation and a more favorable cost structure are expected to support industry profitability. The ongoing consolidation in the sector is also fostering more disciplined pricing behavior, helping stabilize margins.

This is particularly important in light of commodity cost fluctuations, which previously impacted profitability across many infrastructure-dependent sectors. With better cost absorption, more efficient logistics, and rationalized capacities, the sector is entering a stable phase, marked by predictable earnings and moderate capital expenditure requirements.

Infrastructure and Housing Driving Cement Growth

Two major drivers behind the cement demand revival are:

1. Public Infrastructure Push: Major government projects under the National Infrastructure Pipeline (NIP) and PM Gati Shakti continue to generate cement demand. Roads, highways, urban infrastructure, and rural connectivity projects are among the biggest contributors.

2. Affordable and Urban Housing: The government’s continued thrust under PMAY (Pradhan Mantri Awas Yojana) and rising private developer activity in urban centers is further boosting cement volumes.

While rural housing demand remains relatively price-sensitive, urban and semi-urban housing continues to be resilient, with premium housing projects also driving volumes in top cities.

Consolidation Trends and Industry Structure

Over the past few years, India's cement industry has undergone significant consolidation, with several mergers and acquisitions involving both domestic and foreign players. This has led to:

• Improved operational synergies

• Better inventory management

• Higher efficiency in distribution

• Reduced pricing wars

With larger firms commanding a greater share of the market, price discipline has returned, leading to more sustainable industry dynamics.

According to analysts, the top five cement producers now control nearly 60% of India's total production capacity, a sharp increase from a decade ago.

Short-Term Challenges

Despite the overall positive outlook, a few short-term challenges could still temper growth:

• Weather conditions, particularly the timing and severity of the monsoon season, can heavily influence construction timelines and demand.

• Input costs, such as coal and pet coke, although currently stable, remain susceptible to international market fluctuations.

• Election-related expenditure shifts might delay certain state-level infra projects temporarily, though a post-election revival is expected.

Outlook for FY26

The sector is expected to add 25–30 MTPA of new capacity in FY26, mostly in the central and western regions. This expansion is intended to cater to rising demand from both urban infrastructure and greenfield housing projects.

Cement companies are expected to prioritize return ratios, focusing on asset-light models, digital transformation, and enhanced ESG compliance in their operations.

FY26 will likely see smoother price transmission, especially if commodity prices remain benign and demand continues its current trajectory.

Conclusion

The Indian cement sector is entering a transformative phase in FY26, characterized by steady demand, improving pricing power, and enhanced operational efficiencies. Driven by infrastructure recovery, housing demand, and government capital expenditure, the industry is positioned to grow sustainably, despite a few regional challenges and input cost risks.

As India's economy marches forward, cement demand is likely to remain a key barometer of macroeconomic health, making the sector a strategic pillar of the country's development goals.

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