Construction equipment sales, key marker of India's infra sector health, run out of steam; FY25 growth at lowest ever
construction equipment
industry witnessed a significant slowdown in FY25, with growth dropping to 3% compared to the double-digit growth of previous years, due to election-related restrictions on new projects, delays in ongoing projects, and payment delays to contractors, impacting sales of heavy machinery from major companies and raising concerns about the pace of infrastructure development despite optimism for future growth, ToI reported on May 29.
The Rs 86,000 crore construction equipment industry, crucial for large infrastructure projects, saw a considerable deceleration after growing by 24% in FY24 and 21% the year before, the report (by Pankaj Doval) said citing data from the Indian Construction Equipment Manufacturers Association (ICEMA).
The slowdown is attributed to several factors. Restrictions on the announcement of new projects due to the model code of conduct before elections led to delays by the central government and some states.
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ICEMA president V Vivekanand, who is also MD of the Indian subsidiary of
Caterpillar
, noted the impact of the election cycle.
"Restrictions on new project announcements due to the model code of conduct before elections saw the central govt, as well as some states (which also went to polls), delay new project announcements."
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Vivekanand also highlighted a deceleration in infrastructure activities.
"The pace of execution is a cause of concern. The pace of construction of roads has slowed down, not just the national highways but even the rural roads. Sometimes the projects were not delivered on time, and in other cases, the projects were not awarded on time and thus got delayed. Even in mining, demand was muted for the past 15 months."
Delays in payments to contractors also contributed to the slowdown. Deepak Shetty, CEO & MD of Indian operations of British manufacturer
JCB
, pointed to this issue.
"Payments to contractors were believed to have been delayed in many states, which led to a slowdown in purchases of new equipment. Work on many state highways has also slowed down. In some cases, there is a lack of availability of funds for infrastructure projects."
Sandeep Singh, MD of Tata Hitachi, emphasised the importance of resolving execution challenges. Singh told ToI that "resolution of challenges in execution" of projects is key to kickstart demand.
Dimitrov Krishnan, MD of
Volvo CE
India, suggested government support to stimulate demand.
"Govt support, in the form of incentives for both manufacturers and end-users, could accelerate this transition. Inclusion of construction equipment in the PM e-drive scheme and reduction of GST on electric machines are potential enablers," Krishnan told the newspaper.
Despite the recent slowdown, there is optimism for future growth. Jaideep Shekhar, the India MD of Terex, expressed a positive outlook.
Major companies in the construction equipment industry include Caterpillar, JCB,
Tata Hitachi Construction Machinery
,
Cummins
, and Volvo CE. These companies are key providers of machinery for infrastructure projects across the country.
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