Construction Equipment Market Faces Challenges from Polls and Project Delays
Sales of heavy construction equipment, a crucial indicator of infrastructure growth in India, have experienced a significant slowdown in the last financial year. The industry, valued at Rs 86,000 crore, reported only a 3% increase in sales for FY25, a stark contrast to the robust double-digit growth seen in previous years. Factors such as restrictions on new project announcements due to election regulations and a general slowdown in both central and state projects have contributed to this decline in demand.
Impact of Election Regulations on Project Announcements
The slowdown in the heavy construction equipment sector can be largely attributed to the model code of conduct that restricts new project announcements during election periods. V Vivekanand, president of the Indian Construction Equipment Manufacturers Association (ICEMA) and managing director of Caterpillar’s Indian subsidiary, noted that both the central government and several states delayed new project announcements due to the upcoming elections. This has resulted in a noticeable decline in infrastructure activities, with the pace of road construction, including national and rural highways, significantly slowing down. Delays in project awards and execution have further exacerbated the situation, leading to muted demand in sectors like mining over the past 15 months.
Challenges Faced by Equipment Manufacturers
Industry leaders have pointed out that delayed payments to contractors in various states have hindered the purchase of new equipment. Deepak Shetty, CEO and MD of JCB’s Indian operations, highlighted that the slowdown in work on state highways is a direct consequence of funding shortages for infrastructure projects. This has created a ripple effect, impacting the overall demand for heavy construction machinery. Sandeep Singh, MD of Tata Hitachi, emphasized the importance of resolving execution challenges to stimulate demand in the sector. He suggested that government support, including incentives for manufacturers and end-users, could play a vital role in revitalizing the industry.
Future Outlook for the Construction Equipment Industry
Despite the current challenges, industry leaders remain optimistic about future growth. Dimitrov Krishnan, MD of Volvo CE India, pointed out that including construction equipment in government initiatives, such as the PM e-drive scheme, and reducing GST on electric machines could serve as significant enablers for the sector. Jaideep Shekhar, India MD of Terex, expressed confidence in the industry’s potential for recovery, citing the government’s strong emphasis on infrastructure development as a positive sign for the future. As the political landscape stabilizes post-elections, stakeholders are hopeful that demand for heavy construction equipment will rebound, paving the way for renewed growth in the sector.
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