Construction equipment sales may grow 15-20% this fiscal

Sales of construction equipment — a barometer of economic activity — is expected to increase in healthy double digits in the ongoing financial year on the back of increased government spending on infrastructure projects, especially in rural areas.

The industry estimates sales of construction equipment (domestic sales and exports) to grow 15-20% in fiscal 2023, compared with an 8% fall last fiscal year. Even though exports grew 60.5% to 7,802 units in FY22, local sales fell 11.4% to 77,583 units.

“Last fiscal, the industry output declined by about 8% due to a fall in demand for road construction and earth-moving equipment,” said Deepak Shetty, managing director at market leader JCB India, while adding that the government’s focus on infrastructure investment to increase economic activity would, in turn, also help boost demand for them. But a steep rise in input costs and constraints in the supply chain are concerns, he said.

The central government has budgeted a 36% increase in its capital spending to a record Rs 7.5
lakh crore this fiscal year, with a special focus on infrastructure development to spur growth. It
has expanded the scope of the National Infrastructure Pipeline to include 9,335 projects (from
6,835 projects at the time of launch), with total envisaged investments Rs 108 lakh crore during
FY20-FY25, minister of state for finance Pankaj Chaudhary told the Lok Sabha in March.
Among others, the scheme to provide piped drinking water to rural homes, building of smart
cities, commencement of new metro rail development projects and construction of new airports
at Navi Mumbai (Maharashtra) and Jewar (Uttar Pradesh) will trigger growth for the construction
equipment industry, said Shetty.
The PM Gati Shakti national master plan is a path-breaking initiative, which will bring holistic
focus on infrastructure development, he added.
He predicted India to become the second largest market for construction equipment by the end
of the decade. India is currently the third largest for the industry, after the US and China.
Shetty is also the chairman of CII EXCON, a construction equipment and construction
technology trade fair that will be held in Bengaluru during May 17-21. As many as 800 exhibitors
from 46 countries will display their products and technology at the expo. Organisers are
expecting 50,000 business visitors at the five-day event.

Given the regulatory push worldwide towards clamping down on carbon emissions,
manufacturers are increasingly focusing on evaluating and developing products powered by
green fuels such as CNG, biofuels and hydrogen. In India, work is also ongoing to deepen
localisation levels so as to enhance indigenous capability and manufacturing.
“Some products like backhoe loaders have localisation content in the range of 90%. Others
mostly have localisation levels of about 50-60%. MSMEs have been working at enhancing their
capabilities to strengthen the ecosystem and move up the value chain,” Shetty said.