The demand for equipment is directly proportionate to the boom in construction across India. The government's mammoth infrastructure push is likely to propel India's construction equipment industry forward. Although there are a few irritants like delay in statutory clearances and land acquisition, the construction equipment industry can find some solace from the government's commitment to bring in $1 trillion investment in infrastructure, during the Twelfth Five-Year Plan and the move to set up an infrastructure project monitoring mechanism. The government plans to spend around $716.33 billion on infrastructure in the future.This will further increase the demand for construction equipment to around 100,000 units by 2014. The earthmoving and construction equipment market has the potential to grow from a total revenue of $3.3 billion in 2010 to $22.7 billion in 2020. As per a working group report on the Twelfth Five Year Plan, the market size of earthmoving and mining equipment is Rs 14,500 crore at present and the report expects this to grow to Rs 27,376 crore in 2012-13 and further to Rs 45,232 crore in 2016-17. The government's effort to set up a metro rail system in 12 cities with an investment of Rs 14,500 crore in 2012-13 will create huge business opportunities.
Global equipment firms are eyeing emerging markets, especially India, due to the slowdown in Western economies, cost advantage of labour, a strong vendor base, and the government's infrastructure thrust. Indian companies are expanding their capacities either on their own or through partnerships with foreign firms. This will increase competition in the Indian equipment manufacturing sector, further leading to cost efficiency and product innovation.
However, in the short-term, the industry will face headwinds from macroeconomic factors like inflation, tight monetary policy and high fiscal deficit.