Component localization in the mining and construction equipment (MCE) sector might present a Rs 25,000 crore yearly potential to construction equipment suppliers by FY30, according to a research released on Tuesday, as the government prioritizes infrastructure development.
In the next five to seven years, localization levels are expected to increase from 50% to above 70%, driven by parts like precision hydraulics and undercarriages, according to rating agency ICRA.
In terms of sales volumes, the mining and construction equipment (MCE) market in India ranks third globally.
Nonetheless, it imports around 50% of the value of its component requirements from suppliers located in China, Japan, and South Korea, among other countries.
Most parts that are imported include hydraulics, undercarriages, and sophisticated electronics such as electronic control units (ECUs), sensors, and telematics.
“Within the confines of fiscal consolidation, the government is expected to keep prioritizing infrastructure investment over the coming years, given its vision to become a $7 trillion economy by 2030 and the multiplier effect of infrastructure development on economic growth,” stated Ritu Goswami, Sector Head-Corporate Ratings, ICRA.
The industry has a strong domestic manufacturing base, with various degrees of indigenization among equipment types, but it still relies heavily on imports and offers a lot of room for growth.
“More job opportunities can be created through improved localization, which will also protect the supply chain from geopolitical risks and boost operational efficiency,” Goswami said.
For the April–June quarter, the Indian MCE industry recorded a 5% YoY increase in volumes.
Growing domestic demand (CAGR of 12% over the last ten years, FY2015-FY2024) and the PLI scheme for complementary industries like auto components and specialty steel, as well as the changing geopolitical landscape with the adoption of the China+1 policy by global OEMs to diversify their supply chains, are factors that are in favor of increased industry localization.
Macroeconomically speaking, the Center has been focusing on facilitating business transactions and building a strong infrastructure in order to draw in investment and raise the standard of competitiveness of the home manufacturing sector.
“This increased localization share would translate into an incremental business opportunity of over Rs. 25,000 crore for the domestic MCE vendors, with the potential to become a Rs. 2.1 lakh crore market in annual revenues by FY2030,” Goswami stated.
According to the survey, Indian component suppliers are expected to have substantial development possibilities in the export market if the competitiveness of Indian MCE vendors improves.
