Construction equipment industry raises FY27 growth forecast to 9-12%

Improved infrastructure project execution prompts the CE industry to lift its FY27 domestic sales growth forecast; exports are expected to rise around 30 per cent

The Indian construction equipment (CE) industry has raised its domestic sales growth forecast for 2026-27 (FY27) to 9-12 per cent year-on-year (Y-o-Y) from an earlier estimate of around 7 per cent Y-o-Y, helped by an improvement in infrastructure project execution across certain states in India over the past three months.

 

Deepak Shetty, president of the Indian Construction Equipment Manufacturers’ Association (ICEMA), said on Tuesday: “The last three months have been very positive. And industry has grown well. In some places, the execution of projects has started getting expedited. We are also seeing that some of the state governments -- which were earlier not investing that much in infrastructure -- have slowly started doing so.”

  

Shetty, who is also chief executive officer and managing director of JCB India, had on May 8 given an FY27 growth forecast of 7 per cent Y-o-Y for the Indian CE industry.

 

On Tuesday -- in an interview with Business Standard on the sidelines of ICEMA Annual Session 2026 -- Shetty said: “I think the growth outlook has improved a bit. I would say that it should be around 9-12 per cent Y-o-Y in FY27.”

 

This would be a turnaround for the CE industry. Domestic sales of CE in India had declined by 6.7 per cent Y-o-Y to 113,229 units in FY26 due to slower execution of infrastructure projects, higher equipment prices after the transition to stricter emission norms, financing pressures and rising commodity costs amid the West Asia conflict.

 

Shetty said that faster execution of infrastructure projects by state governments could provide an even larger boost to demand, although its full impact may be felt in FY28.

 

The industry also expects strong growth in exports after shipments of construction equipment rose 31.5 per cent in FY26. Shetty expects exports to increase by around 30 per cent in FY27, with Indian equipment seeing strong demand in Africa, Southeast Asia and Latin America.

 

India's major export markets include East Africa, Europe, the US, Southeast Asia and parts of Latin America, according to Shetty. The US and Europe account for the majority of Indian construction equipment exports, although the US market was affected by higher tariffs.

 

Shetty said exports to the US had started recovering as the tariff situation improved. The US had earlier imposed a tariff of around 50 per cent on Indian goods, which has now fallen to around 15 per cent, he said.

 

He also expected recently signed free trade agreements (FTAs), which reduce or remove import duties between countries, to create another opportunity for Indian manufacturers. These include agreements with the UK, the European Union, Australia, New Zealand and the UAE.

 

However, CE manufacturers are facing pressure from higher input and operating costs. The overall cost of manufacturing construction equipment has increased by around 6-7 per cent Y-o-Y over the past six months, with steel prices being one of the biggest contributors, Shetty said.

 

“On top of it, with the West Asia crisis, any imports which used to come through the Red Sea are going all around (taking longer distances). So that has increased both the cycle time and also the cost,” he said.

 

The West Asia conflict -- which started when Israel and the US attacked Iran in late February 2026 -- has significantly affected global shipping routes. Certain components, which were used in the CE industry, were now taking longer routes around Africa instead of using the Red Sea. This has increased both the time required to receive components and transportation costs.

 

Higher wages for contract workers and fuel costs are adding to the pressure, particularly for smaller component suppliers, he noted.

 

Despite the rise in costs, manufacturers have not passed the entire increase on to customers. Shetty said companies have partly raised prices while trying to absorb the remaining impact through cost reduction, higher efficiency and lean management, a system of reducing waste and unnecessary costs in manufacturing.

 

The industry is also looking to increase local production of components that are currently imported. Shetty said excavator makers remain dependent on suppliers in Japan and Europe for main control valves, while electronic control unit (ECU) chips are sourced from Taiwan, Malaysia and the US. Some hydraulic components are also imported.

 

Shetty said the government's proposed production-linked incentive (PLI) scheme for the CE industry would encourage overseas component manufacturers to invest in India. This could reduce import costs while also making Indian-made CE more competitive in global markets.

 

When asked when this scheme was expected to be implemented, he replied: “I think it would not be fair for me to guess. But I think it is at a very advanced stage.”

 

Shetty said ICEMA had been closely involved in discussions with the Heavy Industries Ministry and had also presented its views to a senior adviser in the Prime Minister’s Office. He said the industry had been consulted throughout the process rather than being presented with a finished scheme.

 

“I feel very confident that there will be a lot of takers for the scheme. And it will be one of the very successful schemes. We have seen similar schemes in mobile manufacturing,” he said.

 

Infrastructure spending by state governments remains critical to the industry's growth outlook. Shetty pointed to higher allocations for schemes such as Jal Jeevan Mission and Pradhan Mantri Gram Sadak Yojana, which support water supply and rural road infrastructure, respectively.

 

The Centre has also made ₹1.5 trillion available for infrastructure investment by states, he said. Shetty said greater use of these funds, particularly by states that have been constrained by spending on subsidies and other programmes, could accelerate infrastructure creation and generate additional demand for CE.

 

ICEMA was also working to address a shortage of trained equipment operators. It was working with the Confederation of Indian Industry (CII) on a new skill centre in Sambalpur, Odisha, to train operators for the mining industry. It already has training centres in Chhindwara and Nagpur, among other locations.