UP and Bihar’s construction industry boom powers growth

The resurgence of India’s construction sector is propelling strong economic growth in Uttar Pradesh and Bihar, with the sector contributing 13.4% and 11.2% to their GVA in FY24, surpassing the national average of 8.9%. Robust government investment in infrastructure, housing initiatives like PMAY-U 2.0, and employment schemes for construction workers have fueled this expansion. Uttar Pradesh leads India’s construction GVA share at 12.5%, followed by Tamil Nadu and Maharashtra, highlighting construction as a key engine of regional economic revival and post-pandemic growth.

The revival of India’s construction sector has emerged as a key driver of economic growth in Uttar Pradesh and Bihar, with both states witnessing a significant increase in the sector’s contribution to their Gross Value Added (GVA) in FY24, according to a recent report by HDFC Bank. The report highlights that construction activity in these states has accelerated sharply since the pandemic, supported by robust government initiatives and increasing private sector participation.

The resurgence of the construction sector has substantially bolstered recent growth in Uttar Pradesh and Bihar, with the sector contributing 13.4% and 11.2%, respectively, to the states’ GVA—well above the national average of 8.9%. This growth has been complemented by the fact that both states rank among the top three recipients of the central government’s interest-free loans for capital investment projects, reflecting a strong policy focus on infrastructure-led development.

According to the report, Uttar Pradesh has emerged as the leading contributor to India’s overall construction GVA, accounting for a 12.5% share in FY24. It is closely followed by Tamil Nadu at 11.8% and Maharashtra at 10%. Other notable contributors include Gujarat (6.9%), Karnataka (5.7%), Kerala (5.6%), and West Bengal (5.4%), illustrating the widespread role of construction as a growth engine across multiple regions.

The rapid expansion of the construction sector in Uttar Pradesh marks a remarkable turnaround compared to earlier years. The sector’s share in the state’s total GVA rose from around 12% in FY12 to 13.4% in FY24, reflecting a significant uptick in infrastructure investment and housing development. Bihar, too, has demonstrated steady recovery, with its construction share reaching 11.2% in FY24 after a prolonged period of sluggish growth.

Drivers of growth

The revival in both states is largely fuelled by increased public investment in infrastructure, particularly through government-led initiatives focusing on housing, road connectivity, and urban development. Bihar, for instance, has received approval of Rs 9,640 crore under the ‘Special Assistance to States for Capital Investment 2023-24’ scheme. This allocation significantly strengthens the financial capability of states to undertake large-scale, long-gestation infrastructure projects, directly boosting construction activity across roads, bridges, water supply, and other capital assets.

In addition to large-scale infrastructure projects, central government schemes such as the Pradhan Mantri Awas Yojana (PMAY) have played a critical role in stimulating construction growth. PMAY, the flagship scheme aimed at providing “Housing for All,” supports the construction of houses for eligible beneficiaries in both urban (PMAY-U) and rural (PMAY-G) areas. Under the second edition of the urban scheme, Pradhan Mantri Awas Yojana – Urban 2.0 (PMAY-U 2.0), an additional 1.47 lakh pucca houses have been approved across 14 States and Union Territories, including Uttar Pradesh, further supporting the construction sector and generating employment in allied industries.

Beyond housing, several government schemes have targeted employment and skill development for workers in the unorganized sector, many of whom are employed in construction. Initiatives like the Garib Kalyan Rozgar Yojana focus on providing employment opportunities, including construction-related work, to returnee migrant workers affected by the pandemic. Such programs not only enhance livelihoods but also ensure that the construction sector has access to skilled labor, further strengthening its growth trajectory.

The expansion of construction in these northern states also highlights a broader structural shift in the regional economy. With agriculture and manufacturing experiencing comparatively slower growth, construction has evolved into a major growth engine, cushioning the economy and driving overall development. The sector’s rapid revival has generated a ripple effect, stimulating demand for raw materials, machinery, and services, while also encouraging private sector participation in large-scale infrastructure projects.

Overall, the strong performance of the construction sector in Uttar Pradesh and Bihar underscores a broader economic rebound, driven by a combination of enhanced public capital expenditure, targeted government schemes, and growing private sector involvement.

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FAQs

1. What is construction GVA and why does it matter for UP and Bihar?
It measures the construction sector’s economic contribution. Higher GVA means more growth, jobs, and infrastructure development.

2. How much did the construction sector contribute in FY24?
UP’s construction share was 13.4% and Bihar’s 11.2% of GVA—both above India’s 8.9% average.

3. What government schemes are driving growth?
Key schemes include PMAY-U 2.0, Garib Kalyan Rozgar Yojana, and Special Assistance for Capital Investment 2023-24.

4. Why is UP leading India in construction GVA?
UP ranks first with a 12.5% national share, driven by major infrastructure projects and strong government spending.

5. How is the boom impacting jobs?
It’s creating large-scale employment in construction and allied sectors like cement, steel, and logistics.