Oct 31: The demand for Indian Construction Equipment (ICE) grew by 24% in FY 2017-18, up from 13% in FY 2015-16, and the sector crossed 90,000 units for the first time due to increase in infrastructure expenditure, according to an ASSOCHAM-Feedback consulting joint study.
The Indian Construction Equipment industry grew despite the hiccups of emission and GST during April and July 2017, respectively. Demonetisation also had a negligible effect on the industry growth, conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) jointly with consulting firm Feedback.
The government, which is a major demand driver, also plays a facilitator’s role through policy and regulations. It is the largest end customer accounting for nearly two thirds of the demand for ICE products and hence has a very significant impact on the industry. Also, its role in setting policy and regulation has a further impact on the industry.
Be it GST or ‘Construction, Earthmoving, Material Handling, Mining (CEMM) Act’ or the RERA Act for the Real Estate sector or the sand mining policy or the ‘concrete site mix usage, land acquisition guidelines’, the ICE industry looks to the Government to act as an enabler. Its policy for facilitating export growth helps the ICE manufacturers reach out to existing and new markets, adds the study.
The study also highlighted that highway construction (Roads) has been one of the key drivers for equipment growth. Earthmoving & Mining equipments are largely used for initial land clearing for Road construction.
Similarly, Concrete equipment witnessed a growth, Railways and Metro. Material Handling Equipment (MHE) growth was from a mix of Road & Railways, Metro segment. Material processing was largely led by the Quarry segment, which supplies aggregates to Road Construction, Railways, Irrigation sector and Real estate, noted the joint study.
The Indian construction, mining equipment industry continues to be highly dependent on the demand for Backhoe loaders and Hydraulic Excavators. The Backhoe Loader alone contributed to 40% of the overall sales by volume during FY 2017-18, a very India specific phenomenon. Backhoe Loaders in china account for hardly 0.5% of overall construction equipment sales while in North America it accounts for 8.5%, reveals the joint study.
Capacity utilisation among Original Equipment Manufacturers (OEMs), is above 70% levels. Most of them have expanded and some others are planning expansions in equipment like Hydraulic Excavators, Wheel loaders and other specialized equipment. OEMs are focusing on exports to improve their capacity utilisation. The interest in Indian Backhoe loaders in certain African countries is on the rise.
Recently there have been spurts of government announcements particularly in the roads sector to kick start growth through public spending till private investments kick in. The Government has decided to go down the route of massive increase in targeted spends in capital expenditure and infrastructure to revive economic growth.