The domestic construction equipment industry is expected to return to growth in FY27 after a weak FY26, with the industry body Indian Construction Equipment Manufacturers Association (ICEMA) projecting around 7% growth next year.
The recovery is expected to be driven by higher government spending on infrastructure, improving road construction activity, and increased allocation for rural projects, Deepak Shetty, President, ICEMA said on Friday.
The industry had a weak FY26, with total equipment sales declining around 2% year-on-year to 136,995 units, compared to 140,191 units in FY25, ICEMA data shows. Exports, however, rose more than 30%, partly offsetting the fall in domestic demand.
Overcoming Stage V Hurdles
Shetty attributed the decline in FY26 to state elections, slower execution of roads and highways projects, reduced activity under the Jal Jeevan Mission, and the transition to stricter Stage V emission norms, which increased equipment prices by around 12–15 per cent.
“What happened was that while stricter emission norms helped export growth, they also increased prices in the domestic market,” Shetty said.
Shetty said growth in FY27 would be supported by the Centre’s ₹12.2 lakh crore infrastructure allocation, higher spending on rural roads, railways, mining, and urban infrastructure projects. He added that the extension of the Pradhan Mantri Gram Sadak Yojana till 2028 and increased allocation for the Jal Jeevan Mission would further support demand, particularly in rural areas.
The expected utilisation of the Centre’s ₹1.5 lakh crore infrastructure loan support for states is also likely to aid growth.
ICEMA expects the market to grow to around 250,000 units by the end of this decade, driven by infrastructure spending, exports, and localisation of supply chains amid increased government capex spending. Shetty said the Ministry of Heavy Industries’ Scheme for Enhancement of Construction and Infrastructure Equipment (CIE), aimed at bolstering domestic manufacturing of high-value machinery, would support this growth.
According to Shetty this will also help the industry attract European, Japanese, US and other players to manufacture in India. “We are seeing many foreign players from across the globe planning to participate in the scheme. The scheme will help the industry grow to new heights,” Shetty said. The scheme will run for seven years and will have an outlay of ₹13,000–₹14,000 crore.
Future-Proofing the Fleet
The industry is also expected to gradually shift towards alternative fuel technologies. Smaller machines used in urban areas are likely to adopt electric powertrains, while larger equipment may move towards hydrogen fuel. Medium-sized machines such as backhoe loaders could use CNG or hydrogen-based systems. Shetty estimated that EV, CNG and hydrogen-powered machines could account for 20–25%of the industry by 2030.
India is currently the world’s third-largest construction equipment market after the US and China and is expected to become the second-largest by 2030, according to Shetty. The industry is projected to grow from $10 billion to $14.76 billion by 2030 at a CAGR of 8.3%.
Exports are also expected to remain strong in FY27, with overseas shipments projected to grow around 20%. Exports currently account for nearly 15% of total production and are expected to exceed 25% by 2030 as Indian-made machines gain wider global acceptance.
“Our machines, engineered and manufactured in India, are today going to more than 125 countries,” Shetty said.
Commenting on geopolitical risks, Shetty described the ongoing West Asia crisis as a short-term challenge and said India remains well-positioned to benefit from long-term opportunities in the region due to its manufacturing strength and strategic location.