India's Key Roles In The Construction Industry In India

1.1Background

In India, Construction Industry plays a vital key role in both economic growth and poverty reduction. The industry consumes about 45 to 55% of the national five year plan outlay and contributes to nearly 30% of GDP. A construction industry is the second largest industry next only to agriculture in terms of providing employment in India. Indian Government is targeting an economic growth of around eight per cent during the Eleventh five year Plan (2008-12). Construction projects entire high risk, long construction span, high costs and budget changes. India it is the second most populous country in the world with over one billion people accounting for around 19% of the world’s population. It is estimated that the population living

Therefore the cost overruns demand requires adequate building infrastructure facilities at optimum cost (The India Infrastructure Report 1998). Indian government has attached high priority to the building sector (UK Trade and Investment). Rapid growth in the construction industry in india over the past few years has considerably strained its infrastructure. India needs significant investment in the infrastructure sector as many corporate leaders feel that the current infrastructure is inadequate to support their business needs and long term growth in india . India has been a little slow in creating building infrastructure ahead of demand, and it has typically turned into action when bottlenecks become apparent (Survey report of KPMG International and Economist Intelligence Unit). Investment requirement for housing in urban areas has been estimated at Rs.556000 million (US$ 13.4 billion) in the9th five year plan (1997-2002). The Market size, material market potential, labour required skills are the most important factors for considering Foreign Direct Investment in Construction and Engineering in India. Foreign investors in India expect high rates of return on their investments (FDI Confidence

With forecasting software, many complex statistical forecasting techniques can now be used to forecast construction cost escalation. Univariate time series method, cannot predict turning points. It follows the existing pattern of the data. Multivariate forecast methods are dependent on the accuracy of the explanatory variables used in the forecasts. One of the main difficulties in using the multivariate forecast method is the identification of statistically significant explanatory variables. The accuracy of the multivariate forecasts depend on the accuracy of the explanatory variables used to make the forecasts. The analytical forecasting techniques are only valid for short-term forecasting in stable condition, generally less than one year. No analytical forecasting technique is capable of long-term forecasting of cost escalation. Hastak et al (1996) have carried out a study on cost management planning support system for project cost control strategy and planning (COMPASS). It was presented as a new paradigm and a management tool for formulating effective strategies for project cost control. The study found that through the life cycle of a project COMPASS methodology assists management in evaluating the potential degree of cost escalation. The study identified attributes such as management errors, regulatory