How do you assess the performance of the Indian construction equipment (CE) market in fiscal 2018-19?
The Indian CE industry had a great start during the financial year and took a slight dip on account of liquidity challenges from third quarter of 2018-19. The last quarter has not seen the usual buoyancy due to the anticipation of the Union elections and the continued liquidity situation. In spite of all such challenges, we have seen a 15-20 per cent growth year-on-year across various segments. The GDP growth may be a little short of expectations, which has also contributed to the slight sluggishness. However, the overall CE industry had a good FY2018-19 for all class of equipment and has recorded the highest volumes ever. With several ongoing projects and new announcements, we expect growth sustenance for the industry. In order to gear up to meet the growing demand, most of the manufacturers and distributors had scaled up operations and have efficiently handled the market to meet customer requirements.
What are the major factors that have driven the growth of CE market in this fiscal?
The Road sector has been one of the key demand drivers for various class of construction equipment. National highway construction is likely to be about 29 km/day in the current fiscal year, which is an all-time high in India. The Pradhan Mantri Gram Sadak Yojana (PMGSY) is another area where the Central and state governments are focusing to improve the rural roads. Also, several railway projects have driven growth. Two railway DFCs are under execution and the government is working towards commencing construction on four additional DFCs. The increasing pace of urban development is driving demand for aggregates, granite and marble. New aggregates like M-sand have given us new opportunities. The irrigation projects under the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) were mostly on course and have contributed to the growth of our industry. Overall, we have seen a good sentiment in most of the key sectors.
There are some challenges related to liquidity in the infrastructure market that has affected the growth prospects of CE market. How do you look at this scenario? What are the ways forward to overcome these challenges?
The current liquidity situation is definitely a key area of concern as this has led to many customers and financiers adopting a cautious approach on the purchase and lending of construction equipment. We too think it will take at least 6-8 months for the situation to get back to normal. It is good to have necessary checks and balances in the economy to ensure we don't commit large mistakes. Several steps have been already taken by the government to ease this situation. Infrastructure development industry needs long term investments and revenues are also distributed over a very long gestation period. In the short term or the medium term, there may be certain challenges, but our fundamentals are strong and the government is taking the right steps. I am confident that such challenges will be overcome by our strong economy and our robust industry.
When the industry is on growth path, there come some hurdles, like in the previous year, demonetisation, GST, now the liquidity issues, and in future, new emission regulations and so on. What are the action plans of ICEMA for the CE industry to effectively tackle such market challenges?
The GST challenges were quickly resolved with several interactions with the Ministry and now it has been a strong enabler for the construction equipment business. The GST Council is quite responsive and we are sure that steps will be taken to help our industry. The liquidity constraints also, as I mentioned earlier, is a short-term problem and we are confident we will overcome this in about 6-8 months. As far as the new emission norms are concerned, notifications, implementation of the next stage (BS IV) of emission norms and industry's adoption of the same in a specific time frame is an area we are all working to achieve the desired objectives. ICEMA has been closely interacting with the government and various stakeholders in preparing for the adoption plan of BS IV for construction equipment, which will be implemented over the next few years.
How do you look at the future of CE market in India? What kind of equipment will drive the market growth?
The studies conducted by ICEMA along with knowledge partner Feedback Consulting indicate a stable growth over the next five years. Infrastructure development is going to be a key focus area for any government in the country either in the state or at the Centre. Hence, construction equipment will continue to witness a healthy growth. Today, India contributes to almost 12 per cent of the global CE industry and we see our share continue to grow steadily over the next few years. The scale of the projects is also growing, which is facilitating a market shift to larger size machines. Moreover, utility jobs that cannot depend on manual labour are also increasing, which is driving demand for smaller equipment as well. The market mix of equipment has had a very gradual change over the decade in terms of equipment class/type and we expect a similar pattern to continue. Indian customers are now looking towards adopting advanced technologies and enhanced equipment versatility. Digitalisation and smart machines will drive the CE industry in India over the years to come. Today, most of the OEMs have started to implement Telematics and Information and Communication Technology (ICT) tools on the machines to give the customer benefits of digitisation.
We pioneered the launch of ICT tools on excavators in India. The Komtrax arrangement on Komatsu equipment has benefited the customers on improving asset management. We are also now exploring alternate fuels. We are also looking at the possibilities of introducing hybrid technologies, which will significantly improve fuel efficiency and reduce emissions. The ecosystem to adopt such technologies will gradually develop in the country. ICEMA is working with the Government of India (GoI) to facilitate introduction of such technologies.
During EXCON, we had a day-long conference on the latest technologies available globally and several OEMs from across the globe made presentations on such offerings like hybrids, intelligent machines and autonomous equipment.
What is your vision on the CE industry?
The continued focus on infrastructure development has led to substantial growth in the CE business. The budgetary allocation for the next year is proposed to be around Rs 4.5 trillion. This spending will give the much needed impetus to the CE segment with increased off-take of various equipment for applications in roads and highways as well as other segments such as airports, seaports, irrigation, railways, smart cities, rural development and metro connectivity. Overall, we expect a positive outlook for infrastructure and our industry. We are working closely with various stake holders to adopt global trends like digitalisation on machines, intelligent machines, hybrid technologies etc, to help our country realise the dream of a modern and developed India.