The industry has been on a rollercoaster ride. Net sales of the mining and construction equipment industry declined for the third consecutive year in FY15. It dropped by around 5.3 per cent during the year due to weak demand from the user industries. Iron ore mining activity was affected in Karnataka, Goa, Odisha and Jharkhand. In addition, the Supreme Court ordered to scrap 214 illegal coal blocks allocations. Furthermore, companies including McNally Bharat Engineering Co and Tecpro Systems have been facing a delay in receiving payment from clients. The mining sector underperformed in FY15 and its Gross Value Added (GVA) rose 2.14 per cent in FY15, compared to 5.4 per cent in the previous year, while construction was up 4.8 per cent as against 2.5 per cent in the year before.
With developing infrastructure being on the government´s priority list, there is hope that decision-making will be hastened and rules simplified to create an enabling environment for big-ticket projects. Also, considering the extent of development required, India will have to fast track efforts to effectively translate today´s potential into tomorrow´s reality. The benefits of an increased demand for construction, mining, power, material handling equipment, and equipment and project solutions will naturally reflect in the sector performing better in the next two years.
As believed, there is an evolution of business model, and therefore a shift from Build-Operate-Transfer (BOT) to Public-Private Partnership (PPP). This is evident with the surge in PPP models and the government easing norms for transfer of land, allowing acceleration of infrastructure projects in sectors such as railways, civil aviation and ports to boost economic growth.
Therefore, demand in the Indian construction equipment industry is expected to pick up in the second half of FY16 and grow by 6-7 per cent during the fiscal, followed by a sharper pick-up of around 15-20 per cent during FY17. That said, the year 2016 promises to be a better one for most product segments as a result of the ongoing policy measures leading to absorption of surplus inventory in the market.