The recently unveiled Union Budget 2024-25 will give a major boost to India's construction sector, Action Construction Equipment Ltd (ACE) said in its quarterly investor presentation. The budget will catalyze a surge in demand for construction equipment throughout India, according to the company.
A key aspect of this initiative is a notable increase in capital expenditure outlay, which has seen a substantial boost of approximately 17%, reaching INR 11.11 lakh crores for FY25. This considerable investment is strategically directed towards critical infrastructure development, with INR 2.78 lakh crore allocated for roads and INR 2.52 lakh crore for railways, indicating a favorable period for construction equipment manufacturers, the company pointed out.
The housing sector emerges as a major beneficiary of the budget, with the government unveiling plans to provide affordable housing to 1 crore families under the Pradhan Mantri Awas Yojana (PMAY), ACE said. This ambitious initiative, backed by a substantial investment of INR 10 lakh crore and central assistance of INR 2.2 lakh crore over five years, is set to create numerous opportunities for construction equipment providers, it added. Moreover, the government's vision extends to constructing an additional 3 crore houses under PMAY, encompassing both urban and rural areas, further enhancing the sector's growth potential.
Urban infrastructure development has received a notable boost with the establishment of the Urban Infrastructure Development Fund (UIDF). This initiative, aimed at enhancing infrastructure in Tier 2 and Tier 3 cities, is complemented by an allocation of INR 75,000 crores for 100 critical transport infrastructure projects focused on last and first-mile connectivity for ports, coal, steel, fertilizer, and food grains sectors, the company said. These developments are expected to drive significant demand for various types of construction equipment, ACE added.
The railway sector's extensive plans present another avenue for growth. The development of 400 new Vande Bharat trains over the next three years, coupled with the implementation of three major economic railway corridor programs, is set to support the construction equipment industry, it noted. Additionally, the allocation of INR 31,850 crores for Dedicated New Line projects and INR 40,184 crores for the National High-Speed Rail Corporation Limited underscores the scale of upcoming opportunities.
In the roads sector, which is projected to account for a substantial 18% of capital expenditure over FY 2019-25, the outlook is promising. The National Highways Authority of India's (NHAI) plan to develop 23 new highways, including a network of expressways and economic corridors by March 2025, is expected to fuel considerable demand for road construction equipment. The budget's provision for expanding the National Highways network by 14,000 km in FY24, with INR 20,000 crores to be mobilized through innovative financing, further amplifies these prospects, the company said.
The manufacturing sector, too, presents significant opportunities, with the potential to reach US$ 1 trillion by 2025. The Production Linked Incentive (PLI) scheme across 14 sectors, aimed at realizing the vision of 'Atmanirbhar Bharat,' is expected to generate additional production of INR 3,00,000 crores over the next 5 years, likely boosting demand for industrial construction equipment.
While specific comments from ACE were not available, industry analysts suggest that companies offering a diverse range of construction equipment are well-positioned to capitalize on these developments. The government's commitment to 'Atmanirbhar Bharat' and the 'Vocal for Local' initiative is expected to provide an additional advantage to domestic manufacturers in the construction equipment sector, the presentation noted.
The logistics and warehousing sectors also present notable opportunities, with the logistics market in India forecasted to grow at a CAGR of 10.5% between 2019 and 2025. The government's plan to develop 100 PM Gati Shakti Cargo Terminals for multimodal logistics facilities by 2025 is expected to drive demand for specialized construction equipment, ACE said.
In the ports sector, the Ministry of Ports, Shipping and Waterways aims to complete projects worth INR 2,00,000 crores in the next financial year under the Sagarmala Programme. This, combined with the inclusion of 1,537 projects under the programme at a cost of INR 6,50,000 crores, presents substantial opportunities for construction equipment providers, the company noted.