India is one of the most important equipment markets in the world after China and the US. After five years of uninterrupted growth, the Indian market suffered from disruption for two years, because of elections and the Covid-19 pandemic. Demand witnessed a rise in 2021 despite delayed recovery and overall growth potential for the market remains intact.
The Indian construction equipment market is a cyclical market. The global economic crisis of 2008 led to a sharp decline in growth, but it soon recovered and continued on a growth trajectory till 2011. Thereafter, the market had a sustained downturn till 2015 and subsequently witnessed growth till 2018.
After the 2019 downturn, the market had recovered by beginning 2020, but the outbreak of Covid-19 had a very adverse impact on the demand and till mid-2020 and initially it was expected to decline by about 25-30 per cent. However, the actual dip was about 12 per cent due to release of pent-up demand after the lockdown restrictions were relaxed. The market is expected have grown by about 11 per cent in 2021 and a further 12-15 per cent growth is forecasted in 2022.
The Indian equipment market is dominated by backhoe loaders because of their versatility and being allowed to move on road on their own power. These are among the cheapest construction equipment and first equipment that a contractor buys. Further, it is the first equipment to recover after a downturn. However, when the economy is growing, higher growth is witnessed for more efficient and specialised machines. Off-Highway Research expects the demand for excavators to grow at a faster pace in the future, while backhoe loaders will continue to remain the highest selling equipment. The demand for compact equipment, such as mini excavators is also rising. Overall, the demand is expected to increase for all types of equipment in the near future, but the growth rates will be higher for specialised equipment that sell in smaller numbers.
Customers prefer locally made machines due to better support and faster delivery. Until 2011, domestic sales exceeded local production, but the scenario started changing from 2012 manufacturers started focusing on exports. India is fast becoming a regional export hub and caters to demand from emerging market including neighbouring countries, Africa, the Middle-East and Southeast Asia. Manufacturers have been regularly expanding their capacity and setting up new facilities, which has also led to a decline in imports. Currently, exports constitute about 12 per cent of the domestic production although demand has marginally declined due to the Covid-19 pandemic.
The government is taking initiatives for developing infrastructure in the country, with a National Infrastructure Pipeline outlay of Rs 111 trillion during the period 2019-24. Investments are being planned for every sector with – energy, roads, ports, railways, airports, waterways, and urban and rural infrastructure. Some of the policy reforms for facilitating faster project execution include improved project preparation, enhanced execution capacity, and a robust enabling environment with a strong dispute resolution mechanism.
There are significant prospects for growth due to the gap between requirement and availability. Infrastructure development is vital for the growth of the economy. It also generates employment opportunities. Growth in the construction equipment market will be fuelled by increasing activity in the construction and mining sectors. Increasing demand will also lead to increase in equipment types, components and services.
Some of the challenges that the country faces are high non-performing asset levels, protectionist policies, land acquisition issues, administrative and procedural delays, stressed balance sheets of construction companies, increasing prices of raw materials, new regulations, and uncertainties surrounding Covid-19.
Going forward, long-term growth seems assured with significant infrastructure investment planned by the government. Backhoe loaders will remain popular, though crawler excavators are witnessing increased uptake. India is also growing as a regional export hub. While the threat of Covid-19 continues, the long-term promise for the construction equipment market remains.
Based on inputs from a presentation by Samir Bansal, General Manager, India, Off-highway Research, at “InfraBuild India”