With the Union Budget for FY27 scheduled for February 1, the construction equipment (CE) sector is closely monitoring potential policy measures aimed at strengthening domestic manufacturing and reducing import dependence. According to sources, the government is considering an incentive scheme of over Rs 13,000 crore, targeting high-value equipment such as tunnel boring machines, ropeways, backhoe loaders, cranes, engines, and transmission systems.

The scheme is expected to form part of a broader effort to bolster India’s capital goods sector, which is critical to infrastructure creation. Public investment remains a key driver of economic growth, with capital expenditure for FY26 pegged at Rs 11.11 lakh crore, approximately 3.4% of GDP, with infrastructure taking a significant share.

Officials note that gaps in construction equipment manufacturing have often delayed project execution, particularly in highways, metro rail, and urban development projects. The proposed framework may include a domestic value addition requirement of around 50 per cent, intended to encourage manufacturers to go beyond assembly and produce engines, electronic systems, control units, and specialised steel components locally. Currently, a significant portion of CE in India is assembled from imported components, primarily from China, limiting domestic supply chain resilience.

“Tunnel boring machines are increasingly central to metro and underground projects, while ropeways are being deployed for urban mobility and tourism in hilly regions. Cranes and loaders remain critical for road construction, real estate development, and agriculture,” officials said.

Industry leaders have shared their expectations ahead of the budget. Rajan Luthra, CFO, Action Construction Equipment - ACE, says, “This Union Budget is at a critical juncture for India to set the stage for sustainable economic growth, amid global trade headwinds and an uncertain external environment. With public capital expenditure continuing to anchor economic momentum with Rs 11.21 lakh crore earmarked for FY2025–26, India’s infrastructure push remains a critical driver of GDP growth and employment. For the construction equipment industry, we expect demand recovery to be led by rising private capex, expanding export opportunities, defence applications, and sustained investments in airports, railways, and freight corridors. Supportive policy measures, including GST rationalisation, easing interest rates, and improved liquidity, will be further vital to crowd in private investment and strengthen industry confidence. As project execution accelerates, visibility across equipment categories will improve, alongside deeper adoption of digital technologies such as telematics and predictive analytics. By prioritising these strategic initiatives, the government can pave a thriving and inclusive future, contributing to India’s role in the global economy.”

Deepak Shetty, CEO & MD of JCB India, adds, “As the Union Budget approaches, the CE industry looks forward to continued policy support that sustains India’s growth momentum. Infrastructure investment has consistently demonstrated a strong multiplier effect, and its ongoing prioritisation will be critical in enabling economic expansion across sectors. Enhanced funding support for state governments can further accelerate rural infrastructure development, particularly roads and water projects. At a time when global trade conditions remain challenging, there is an opportunity to reinforce export competitiveness through WTO-compliant incentive frameworks and more effective utilisation of India’s Free Trade Agreements. A balanced emphasis on scaling up manufacturing, alongside sustained infrastructure development, will play a pivotal role in positioning India as a resilient and globally competitive economic powerhouse.”

Other sectors are also looking for clarity. Kartik Daftari, MD & CEO at Hi-Tech Radiators, notes, “With the upcoming Union Budget 2026, we see a clear opportunity to increase investments in power transmission, grid modernisation, and energy storage infrastructure. As renewable capacity scales quickly, strengthening high-voltage networks and storage-led grid flexibility will enhance the reliability and efficiency of the energy ecosystem. Indian manufacturers can integrate deeper into international supply chains through technology-driven capacity development and localisation of critical power equipment. Streamlining regulatory procedures, expanding access to long-term financing, and rationalising indirect taxes will help build businesses with ease. In order to establish India as a competitive hub for next-generation power, we want the forthcoming budget to balance industrial expansion with sustainability goals.”

S Sunil Kumar, Country President of Henkel Adhesives Technologies India, highlights manufacturing priorities: “Policy priorities are increasingly focused on unlocking Tier-2 and Tier-3 manufacturing corridors to expand domestic market access, mobilise available labour pools, and accelerate job creation. With India’s emphasis on ‘Responsible Growth,’ sustainability has moved into the mainstream and now functions as market?access infrastructure, shaping domestic and export competitiveness and influencing institutional capital flows. Targeted policy support to localise critical chemical intermediates, scale domestic production, enable technology transfer, advance application-led R&D, and deepen value addition can significantly strengthen manufacturing resilience.”

Kuldeep Bhan, Group President – Global Metallurgy Business, Neterwala Group, adds, “Ahead of the Union Budget FY 2026-27, the Neterwala Group advocates for a resilient metallurgical framework to drive ‘Atmanirbhar Bharat.’ We urge strategic measures to bolster raw material security, including duty exemptions on ferro-nickel. Targeted support for MSMEs supplying defense, aerospace, and energy sectors will strengthen our industrial base, enabling small-scale innovators to integrate seamlessly into high-integrity global value chains and foster inclusive national prosperity. Amid current geopolitical volatility and rapid global shifts, India’s budget must diversify exports beyond single markets to penetrate diverse world markets effectively.”

Ahead of the budget, CE makers and allied sectors are closely evaluating potential incentives, localisation requirements, and funding support that could affect production, project execution, and export competitiveness. Digital adoption, predictive technologies, and deeper integration into domestic supply chains are likely to be key areas of focus, depending on the government’s policy signal.

As infrastructure projects expand—from highways and metros to airports and freight corridors—sectoral expectations point to a budget that balances support for domestic manufacturing, export competitiveness, and long-term investment in high-value equipment. The CE industry and related manufacturing sectors are poised to interpret policy announcements as signals for strategic planning in the months ahead.