In contrast to the general trend, the Mining and Construction Equipment (MCE) sector in India recorded a 5% YoY increase in volumes during the April-June quarter, according to a report released on Tuesday.
According to credit ratings ICRA, the sector was anticipating a decline in domestic demand in the first half of this year, which coincided with the growth, according to preliminary statistics given by the Indian Construction Equipment Manufacturers Association (ICEMA).
According to the report, the slowdown in new project award activity (caused by the Model Code of Conduct implemented in anticipation of the April–June Parliamentary Elections) and the impact of the monsoon on construction activities in Q2 FY2025 were the main drivers of this expectation, which was consistent with previous election cycles.
However, Q1’s performance indicates that customers are optimistic about the government’s continued emphasis on infrastructure development and how that may affect MCE demand.
“The new project award activities (and MCE volumes) are expected to ramp up faster than previously anticipated in H2 FY2025,” stated Ritu Goswami, Sector Head – Corporate Ratings, ICRA, “with renewed confidence regarding policy stability towards infrastructure-fuelled economic development.”
The earthmoving and concreting equipment segments, which experienced YoY growth of 5% and 8%, respectively, propelled the expansion in domestic sales in Q1.
The statistics showed that the segments for material handling, road, and material processing equipment reported flattish volumes.
35–45% of MCE sales in the nation are driven by road construction, with the remaining 20% coming from mining, 10%–20% from real estate, and other sources.
The Jal Jeevan Mission, the PM Gram Sadak Yojana, and the PM Aawas Yojana—schemes that have been among the main drivers of the demand for new equipment—have received a solid allocation in the Union Budget, according to the report, which is a positive step going forward.
Given the severity of the monsoons in numerous states thus far, an increase in state government capital expenditure may result in a quicker reversal in building activity/MCE volumes; however, the ICRA research warned that this may only become more apparent in the coming months.
