India's construction equipment industry has seen an abrupt slowdown this year, but the industry remains bullish, reassured by the government's development agenda.
21 Feb 2025 | 2434 Views | By Shahkar Abidi
India's construction equipment industry has seen a marked slowdown in the current financial year, falling to a growth rate of just 3% for the first half from 25% in FY24. However, even as this sudden decline has caused some inconvenience for major players, industry leaders remain confident of the medium-term ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
India's construction equipment industry has seen a marked slowdown in the current financial year, falling to a growth rate of just 3% for the first half from 25% in FY24. However, even as this sudden decline has caused some inconvenience for major players, industry leaders remain confident of the medium-term prospects for the industry.
They attribute the deceleration seen in the current year to a pause in the announcement of new projects due to the general elections that took place in April-June 2024. V. Vivekanand, President of the Indian Construction Equipment Manufacturers Association (ICEMA), however, foresees a rebound in demand as government operations regain momentum.
Moreover, festive-season demand and the continued emphasis on infrastructure in the Union budget are expected to fuel growth through the rest of the year. “We do have good reason to believe that this festival season and the subsequent quarter, which is early next year, will see significant improvement in demand,” Vivekanand says, projecting a 10–15% improvement in the industry’s performance for the year.
Last year's 25-26% growth, consistent across all segments, was propelled by sustained government spending on infrastructure—which has emerged as an essential driver for the sector. Road construction projects spearheaded this boom, complemented by demand from mining, railways, ports, and general construction activities.
The steady stream of large-scale projects has created strong demand for advanced equipment across India. “The growth has been fairly consistent across all segments,” notes Vivekanand. “It’s probably plus or minus 2% here and there, but across all segments, we had a significant amount of growth.”
The membership of ICEMA, representing over 135 companies accounting for 95% of India’s CE industry, reflects the extensive scope of the sector. Member companies manufacture a diverse range of equipment, including hydraulic excavators, motor graders, and concrete batching plants.
As the Confederation of Indian Industry (CII)-affiliated body notes, government initiatives such as the National Infrastructure Pipeline (NIP), Bharatmala Pariyojana (83,000 kilometres of highways), Sagarmala (ports and coastal infrastructure), and the Smart Cities Mission are pivotal.
These programs have unlocked substantial budget allocations, with 15–20% of the investments translating into equipment demand. The construction equipment market, valued at $9.5 billion in 2023, is projected to grow to $25 billion by 2030, posting a CAGR of 12%, as per a report released by the advocacy group.
The growth is expected to come on the back of an expected investment of around $4 billion in the industry value chain, including around $1 billion by manufacturing OEMs over next five years and three times that by suppliers, component manufacturers and distribution channels, it believes.
The Indian CE market has more than 50 OEM manufacturers and provides employment to over 3 million people (direct and indirect).India’s trade in construction equipment with the rest of the world is around $3 billion, of which imports are $2.6 billion and exports are around $500 million. Furthermore, ICEMA expects that with robust efforts, the CE industry could grow at a faster rate to achieve a market size of $42 billion by FY35.
Within the broader CE category, earthmoving equipment comprises the dominant segment with a 72% share in FY23, and is expected to rise to 81% by FY35. It is followed by concrete and material handling, with a share of almost 11% in FY23 and a projected 6% share by FY35. The smallest segments are road construction and material processing, with 4% and 2% in FY23.
Exports
Vivekanand, who is also the Managing Director of Caterpillar India Pvt Ltd, stated that while domestic growth sustains, exports have emerged as a critical growth avenue. Indian construction equipment exports are expected to grow by an impressive 50% YoY in the current fiscal. The shift in global supply chains, influenced by geopolitical tensions and challenges in China, has positioned India as a competitive alternative for global buyers.
The United States has been a particularly strong export market, driven by a thriving economy and demand for reliable suppliers. Meanwhile, Europe’s performance remains lacklustre, while Africa presents moderate opportunities. These trends suggest that the global demand for construction equipment is aligning with broader economic conditions, offering manufacturers in India a chance to expand their global footprint. India’s CE exports are currently worth about $0.7 billion, comprising 0.4% of the global CE market size, which is projected to grow to $3 billion by 2030 (1.2% of the global market), ICEMA added.
Localisation: The Long Game
A cornerstone of India’s CE strategy is increasing localisation. Currently, localisation levels vary, but average around 50%, reflecting a reliance on imported components for advanced technologies. ICEMA aims to raise this to 70–80% by 2030 through initiatives that strengthen domestic supply chains and encourage foreign manufacturers to set up production facilities in India.
Such efforts could enhance the competitiveness of Indian manufacturers while reducing dependency on imports. Additionally, workforce development has emerged as a priority. With accelerating technology adoption, the industry is investing in training operators, technicians, and service personnel to ensure the efficient use and maintenance of advanced equipment.
By addressing skill gaps and enhancing safety standards, ICEMA aims to future-proof the workforce and extend machinery lifecycles. The construction equipment industry in India stands at a pivotal moment. While domestic growth may be moderated by the election cycle, exports continue to shine, offering manufacturers a lucrative avenue for expansion. Investments in capacity, localisation, and technology are setting the stage for long-term growth, supported by government infrastructure spending and global demand.
As with passenger and commercial vehicles, the shift towards greener technologies, localisation, and global integration will be key to maintaining competitiveness in an increasingly interconnected world. With the market projected to grow to $25 billion by 2030, the next decade promises to be transformative for India’s construction equipment sector—and a compelling example for other industries navigating similar challenges. With the right kinds of investments and policies, India’s construction equipment sector could serve as a blueprint for growth and innovation across manufacturing industries.