India's road network has expanded by 59 per cent over the past decade, making it the second largest globally. National highway construction has grown at a compound annual growth rate (CAGR) of 9.3 per cent between FY16 and FY24. The government’s continued emphasis on infrastructure development has also led to robust demand for construction equipment (CE). In FY24, the sector experienced a notable 26 per cent growth compared to the previous year.

Ranjan Sharma, Senior Director – Large Corporate Ratings, CareEdge Ratings, states, “There has been a significant focus of the Union government on infrastructure development in the country, which has resulted in nearly all segments like roads, ports, and bridges performing well. Looking at the performance of the top 18 to 20 listed EPC companies, their order books have been growing consistently year on year. The pace of road construction in India in FY24 was one of the highest (i.e., 34 km per day, compared to 28 km per day in the previous year), as a large number of projects were awarded in the preceding two years. In FY24, the CE industry, which plays a pivotal role in infrastructure development, grew by 25 per cent (in terms of units sold), led by earthmoving, material handling, and road CE.”

However, in the current fiscal year (the first five months), there has been a slowdown in project awards. Experts now expect the road construction pace to moderate in FY25 to about 31 km per day, down from 34 km per day. Even so, this speed remains among the fastest in the world in the road construction segment.

Explaining the key drivers behind the CE industry, Sandeep Singh, Managing Director, Tata Hitachi Construction Machinery, says, “Road construction, mining, housing, and the Har Ghar Jal Yojana are the main growth drivers. However, this year, heavy rains and elections led to stagnation in growth. Mining is also growing, having been privatised. Overall, we expect an average growth rate of 10 to 15 per cent over the next five years.”

Today, India’s unfolding growth story is drawing attention from around the world. Bolstered by strong automotive sales, the Indian auto component industry is aiming to increase its value from $20 billion to $100 billion over the next six years. Similarly, the Indian Construction Equipment Manufacturers' Association (ICEMA) has set an ambitious target of $25 billion by 2030, up from its current $9.5 billion, for the Indian CE industry.

According to Vipin Sondhi, Chairman, RAHSTA Expo Committee, CE manufacturers in India should focus on a seven-point agenda to build a stronger industry. He says, “The industry should aim higher (think global and build big brands), obsess over total quality, scale production, invest in R&D and innovations, strengthen the domestic supply chain, adopt Industry 4.0 and digitalisation, and invest in talent to propel the industry forward.”

India currently spends 0.5 per cent of its GDP on R&D, whereas developed countries typically allocate 2.5 per cent of their GDP to it. To maintain market dominance and strengthen exports, CE makers will need to focus more on innovation. Attracting young talent is also crucial for the continued growth of CE manufacturing. Sondhi adds, “If the younger generation understands that technology is the driving force in manufacturing, they will be attracted to the sector.”

Global CE manufacturers are leveraging their domestic arms not only to serve India but also to tap into global markets. ICEMA has set a target of $3 billion in CE exports by 2030; a goal that seems achievable, considering India exported $0.5 billion in CE in FY24. Dimitrov Krishnan, Managing Director, Volvo CE India, shares, “Exports have doubled in the last two years. This growth is happening in both CE and the components market, particularly in the fabrication industry. I believe this trend is entirely positive. India is the third-largest CE market globally, and is set to become the second-largest, which will undoubtedly attract the scale necessary for construction equipment. The global CE market stands at 1.2 million machines across all product types, presenting a huge export opportunity. More than 30 countries are already receiving machines from India today.”

As environmental concerns continue to rise, CE manufacturers are also preparing to help construction companies minimise their carbon footprint. Sustainability efforts will be further supported by the implementation of Stage 5 emission standards for construction equipment vehicles (CEVs) in India, which will take effect on January 1, 2025. Shalabh Chaturvedi, Managing Director for India and SAARC, CASE Construction Equipment, comments, “The Indian CE industry is moving toward some of the world’s strictest emission norms (Stage 5). To meet these upcoming standards, the supply chain must also adapt. Many CE OEMs are extending sustainability targets to their suppliers as well.”

As emission standards become more stringent, construction equipment will require high-quality components to meet these new requirements. Sanjay Koul, President - India and SE Asia, and Managing Director – India, The Timken Company, opines, “To manufacture CE that promotes savings and sustainability, component suppliers will have to play a crucial role.”

Discussing trends, Koul adds, “The shift from conventional (fossil) fuels to alternative fuels is inevitable, requiring changes in CE design, components, and materials. For example, the bearing industry is already working on alternative materials to meet the emerging needs of CE manufacturers. Smart batteries, smart hydraulic systems – all of these innovations will come. We need to keep an eye on developments in advanced countries and catch up accordingly.”

Rising income levels are driving the demand for better infrastructure, which is expected to maintain the strong demand for CE. As CE manufacturers expand their production footprint in India, they are also looking to increase sourcing of components and machinery for CE production from domestic suppliers. Sitaram Ganeshan, President, Wipro Hydraulics, shares an optimistic outlook for the CE manufacturing industry: “We can become the second-largest CE manufacturer globally. We are also excelling in the components manufacturing sector, with 60 per cent of our business coming from outside India.”

The growing emphasis on higher quality standards is driving greater mechanisation, especially in larger projects, which is further propelling the industry’s growth. SP Rajan, Vice President and Head of Plant & Machinery at L&T Construction, states, “CE manufacturers must be fully prepared to meet future requirements. I would like to see more use of biofuels in the near future. For electric equipment, we should develop systems that don’t require charging. Companies should create self-charging technologies, like solar batteries, where heat is converted into energy. We should also focus on improving the ease of operation for operators.”

The construction equipment industry is poised for substantial growth in the coming years, driven by increased government spending, rapid urbanisation, technological advancements, and the ‘Make in India’ initiative. As the CE sector continues to evolve, the road ahead is filled with promising prospects, laying a strong foundation for a more prosperous and better India.