$1.2 Billion Bet!
India’s construction equipment industry is approaching a critical inflection point. As infrastructure spending expands across highways, metros, airports, tunnels, industrial corridors and energy projects, the machines required to build this infrastructure are becoming larger, more sophisticated and more technology-intensive. Yet, in several high-value equipment categories, India still depends heavily on imports. The government now wants to change that equation.
India is set to approve a $1.2-billion incentive scheme to promote domestic manufacturing of high-value, technologically sophisticated construction and infrastructure equipment. The seven-year programme is expected to attract around $1.8 billion in fresh investment and will cover equipment including tunnel boring machines (TBMs), firefighting equipment and elevators. It will also include local value-addition targets for machines that are currently fully imported.
The significance of the proposal goes beyond the size of the incentive. It represents an attempt to address one of the biggest structural weaknesses in India’s construction equipment ecosystem: the gap between the country’s enormous infrastructure ambitions and its ability to manufacture some of the most critical machines needed to deliver them.
For an industry that is already estimated at around $9-10 billion and is expected to expand further, the timing is significant. According to Manish Mathur, CEO – Cranes, Action Construction Equipment (ACE), the construction equipment sector is targeting the position of the world’s second-largest market by 2030, with the market expected to grow from around $10 billion currently to $14.76 billion, according to ICEMA.
“At a time when Indian government is prioritising self-reliance in manufacturing and reducing dependence on imports, such incentives can provide a significant impetus to homegrown manufacturers by enabling greater investment in technology, R&D and indigenisation,” says Mathur.
But the challenge is not simply to manufacture more machines in India. It is to build the industrial depth needed to manufacture them competitively.
The import gap
The dependence is particularly visible in specialised equipment. Tunnel boring machines provide a striking example. India is undertaking some of the world’s most ambitious tunnelling projects, from metro systems and road tunnels to the Mumbai-Ahmedabad high-speed rail corridor. Yet the country remains heavily dependent on imported TBMs, with China among the important suppliers. The proposed incentive scheme specifically identifies TBMs as one of the categories where domestic manufacturing capability needs to be strengthened.
For contractors, this dependence is not merely a question of price. It can become a project-delivery risk.
Dr Lakshmana Rao Mantri, Dy General Manager, Afcons Infrastructure, points to the limited number of TBM suppliers available to the Indian market. According to him, Afcons’ Mumbai-Ahmedabad high-speed tunnel work faced delays because TBMs were unavailable, with geopolitical factors adding to the problem. He also highlighted the need to move beyond dependence on “only one or two players”.
The lesson is clear: for strategically important infrastructure, equipment availability can become as important as equipment cost.
The government’s proposed scheme could therefore create an opportunity for companies such as BEML, which has plans to manufacture TBMs domestically, as well as other manufacturers including Larsen & Toubro and Johnson Lifts. However, TBMs are only one part of a larger story.
Beyond the machine
India’s import dependence does not end with complete machines. Critical components and technologies continue to come from overseas, limiting the depth of localisation even when equipment is assembled or manufactured domestically. The hydraulic system is a case in point.
B Seshnath, CEO & MD, Walvoil Fluid Power India, points to load-sensing proportional valves, a technology that was not easily available domestically. Walvoil initially imported these systems from Italy before beginning production in India.
This transition illustrates what successful localisation actually requires. It is not enough to establish an assembly line. The ecosystem must progressively move into the manufacture of sophisticated components, systems and technologies.
For Anand Sundaresan, an industry veteran with more than 47 years of experience, this remains one of the biggest gaps in Indian construction equipment manufacturing.
“India’s component manufacturing ecosystem is incomplete,” he says, pointing to the continued dependence on imported hydraulic components and other critical systems. Even in excavators, he notes, basic components such as track chains are still imported by OEMs. His argument is that the $1.2-billion initiative will have to go deeper than final equipment manufacturing if it is to create durable competitiveness.
“The component ecosystem must be strengthened significantly,” says Sundaresan. He believes the government should consider incentives for component manufacturing, including support for exports and mechanisms to manage volatility in the prices of imported raw materials.
That is critical because localising a component does not automatically make it competitive. Indian manufacturers continue to face high steel, fabrication and processing costs.
The China challenge
The push for localisation is also taking place against a backdrop of intense price competition from Chinese equipment. In excavators, Sandeep Singh, Managing Director, Tata Hitachi Construction Machinery, has highlighted the growing presence of Chinese OEMs, which are estimated to account for around 20-22 per cent of the excavator market, compared with less than 10 per cent five years ago.
Sundaresan says the impact is especially severe in the 23-tonne-and-below excavator segment. “Cheap imports—whether from China or elsewhere—have affected some Indian equipment manufacturers very badly,” he says. “Prices of imported machines have dropped so sharply that several established Indian OEMs have lost significant market share.”
The problem is particularly acute in Tier 2 and Tier 3 contractor markets, where purchasing decisions are often dominated by initial acquisition cost rather than lifecycle cost.
This creates a structural disadvantage for Indian OEMs. They have to contend with higher steel and fabrication costs, expensive capital and dependence on imported components, while competing against fully imported machines that can be offered at aggressive prices.
The rental market can amplify the pressure. Rental companies naturally look for lower entry costs and shorter payback periods. That, in turn, influences market pricing and residual values.
The result is a difficult cycle: lower import prices push market prices down; lower market prices make domestic manufacturing less attractive; and reduced manufacturing scale makes it harder for Indian OEMs to achieve the cost advantages required to compete.
Can trade remedies help?
This is where the policy debate around the $1.2-billion incentive intersects with anti-dumping measures.
India already has a framework for trade remedies, but industry players argue that implementation has often been slow or inadequate. The crane segment provides perhaps the clearest example.
The Directorate General of Trade Remedies (DGTR) recommended anti-dumping duties ranging from 24 per cent to 52 per cent on certain Chinese crawler and truck cranes in September 2025. Yet, nearly a year later, the recommendation was still awaiting the final customs notification after Finance Ministry approval. The proposed duties cover crawler cranes up to 260 tonnes and truck cranes up to 160 tonnes.
Industry estimates cited by Outlook Business put Chinese manufacturers’ share of India’s crane market at nearly 95 per cent, while five major domestic crane manufacturers have shut down their manufacturing operations.
Sundaresan argues that the problem is broader than the speed of notification. “Anti-dumping exists on paper, but offers little real protection,” he says. According to him, limited category coverage, treatment of completely built units versus kits and sub-assemblies, classification loopholes and weak controls on used equipment can dilute the effectiveness of trade remedies.
The concern is not unique to India. Europe is also reassessing the impact of Chinese equipment imports. The European Commission has initiated an anti-dumping investigation into Chinese mobile cranes following a complaint from European manufacturers, highlighting how concerns around price distortion and industrial capability are becoming global issues.
For India, however, the question is particularly important because domestic equipment manufacturers are being asked simultaneously to invest in technology, localisation, cleaner engines, digitalisation and advanced manufacturing.
Price is not the only measure
Prof Dharamveer Singh of IIT Bombay offers another dimension to the localisation debate.
“We are getting imported rollers from Germany, imported pavers from Germany. We are getting all the machineries from everywhere, top class machineries actually,” he says.
But his larger point is that equipment quality alone does not determine infrastructure outcomes. Engineering capability, project execution, operator skills and knowledge are equally important.
This distinction will matter as India develops its own high-value equipment.
A domestically manufactured machine cannot succeed simply because it is Indian. It has to meet the performance, reliability, safety and productivity expectations of demanding contractors.
Sunil Jain, Senior Consultant (SAARC), Sinoboom Intelligent Equipment, offers a similar perspective from the access equipment segment. Sinoboom has close to 400 machines operating in India, and Jain says customers are increasingly focused on performance and safety rather than simply the country of origin.
“The first question customers ask is not where the machine comes from, but whether it meets performance and safety expectations,” he says.
Customers, he adds, want to see machines operating, assess uptime and evaluate service capability before committing to larger purchases. That suggests that localisation must ultimately be driven by competitiveness rather than protection.
From Make in India to Make for the world
The strongest outcome of the proposed scheme would not be simply replacing imported machines with Indian-made machines. It would be creating manufacturers capable of competing globally.
Sundaresan believes Indian OEMs should aggressively pursue markets in Africa, the Middle East and Southeast Asia. Companies such as JCB have demonstrated that Indian manufacturing can serve global markets at scale.
But he points to another constraint: territorial restrictions imposed by some multinational parents on equipment manufactured in India. If Indian plants are to become global manufacturing hubs, they need access to international markets.
This is where the proposed $1.2-billion incentive can become more consequential. If incentives encourage investment in R&D, technology, tooling, testing, component manufacturing and production scale, they can potentially reduce costs while improving capability. If they are accompanied by export incentives and a stronger supplier ecosystem, India could move from being a large consumer of construction equipment to becoming a significant producer and exporter.
Mathur sees the opportunity in similar terms. “Such incentives can provide a significant impetus to homegrown manufacturers by enabling greater investment in technology, R&D and indigenisation,” he says. “Equally, appropriate anti-dumping measures on Chinese equipment would be strategically important to ensure a level playing field and complement these policy efforts.”
The real test
The proposed $1.2-billion incentive scheme is therefore less about the headline number and more about what it can catalyse. The government expects the scheme to attract $1.8 billion in fresh investment over seven years. It also intends to introduce local value-addition targets for equipment that is currently fully imported. But investment will need to flow beyond final assembly. It will have to reach components, hydraulics, electronics, powertrains, controls, software, testing infrastructure and R&D. Procurement practices will also matter.
Sundaresan argues that government tenders should not be decided purely on L1 pricing. Quality, durability, availability, after-sales support and lifecycle cost should form part of the evaluation.
Indian manufacturers also need to strengthen their own proposition. Digital machine monitoring, predictive maintenance, better spare-parts logistics and transparent service support can help OEMs demonstrate lower total cost of ownership even when their upfront price is higher.
The construction equipment industry is ultimately entering a phase where scale alone will not be enough. India will need machines that are technologically competitive, components that are globally competitive and manufacturers that can survive without permanent protection.
The $1.2-billion scheme could provide the catalyst. But the bigger challenge is building the ecosystem around it. India has already demonstrated that it can become a major manufacturing base when policy, investment, technology and market demand align. The next test is whether that model can be extended to the most sophisticated machines used to build the country itself. The opportunity is significant. So is the risk.
If the scheme succeeds, India could emerge not merely as the world’s second-largest construction equipment market, but as a globally relevant manufacturing and export hub. If it does not, the country could continue to spend billions building infrastructure with machines whose most critical technologies are designed and manufactured elsewhere. That is what makes the $1.2-billion bet worth watching.
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