The expansionary budget announced by the Indian government at the end of February will create challenges and opportunities for the GCC’s construction sector.

As the Indian government and the private sector gears up to invest in infrastructure and industrial projects, Indian contractors could be less hungry for orders in the GCC, and labour may prefer to stay at work on projects closer to home. While other firms would undoubtedly welcome less competition, less readily available cheap labour would drive up costs.

According to regional projects tracker MEED Projects, Indian contracting companies were awarded deals on almost $10bn of projects in the GCC last year, while the majority of the estimated 20 million labourers and thousands more white-collar professionals working on the GCC’s construction sites come from India and other subcontinent countries such as Pakistan and Nepal.

In India, the government, headed by recently elected Prime Minister Narendra Modi, plans increased infrastructure spending of $288bn this year to keep pace with the country’s economy, which the Finance Ministry forecasts will grow by 8.5 per cent.

To further facilitate infrastructure schemes, the government has created a National Investment and Infrastructure Fund with annual support of $3.2bn from the government, and has also introduced tax-free infrastructure bonds for road, rail and irrigation projects.  For power, the government earmarked $16bn of funding for five new 4,000MW stations, and for rail, it plans to invest $137bn over the next five years.

These projects, together with new real estate schemes, will create opportunities for the region’s construction companies that will look to build on the contract awards they have secured in India in recent years.

In 2011, UAE-based Arabtec Construction was awarded an estimated $204m contract to build three mixed-use projects in New Delhi and Gurgaon in India. Also in 2011, a joint venture of Lebanon’s Arabian Construction Company (ACC) and India’s Simplex Infrastructures was awarded a deal to build a residential tower in Mumbai, which when completed will be the tallest building in India.