Noida, August 26

After a decade labouring on building sites around New Delhi, Akhilesh Kumar lost his scaffolding job last month when his employer halted work on an array of 30 residential towers.

He joins more than half a million workers let go from sites around India’s capital in the last 18 months, in a stark sign that the ground reality in Asia’s third-largest economy is far from as rosy as official data suggests.

The deepening downturn in India’s crucial building sector makes it easily understandable why Prime Minister Narendra Modi’s image as the country’s economic saviour has lost its lustre just over a year after his resounding election victory.

“If I don’t get another job, I have no other choice but to go back to my village and work as a farm labourer,” said Kumar, who is in his 20s.

The decade-long construction boom in burgeoning cities like Noida, where Kumar earned $165 a month, lured millions of labourers from India’s rural hinterlands in search of a better life, creating one in every three new jobs.

That process is now going into reverse, undermining Modi’s promise to create more employment for the one million Indians who join the workforce every month.

Indebted developers are cutting staff as they slow work on existing projects and postpone new buildings until they clear a backlog of 700,000 unsold homes.

A law to clamp down on ‘black money’ flows that fund as much as a third of real estate deals is further squeezing demand.

Across India, housing starts fell 40 per cent in the first half of the year, consultancy Knight Frank said. Cement output grew 0.9 per cent between April and June, down from 9.6 per cent a year earlier when Modi took office, government data show.

“The slowdown in the construction sector is very, very depressing which will have a negative impact on the overall GDP growth numbers in the first quarter of the current fiscal year,” said Samantak Das, chief economist at Knight Frank India.

Rating agency Moody’s last week cut India’s growth forecast to seven per cent for this fiscal year, against the government’s target of eight to 8.5 per cent.

India releases its GDP figures for the April to June quarter on Monday.