Indian Mining and ConstructionEquipment industry to report 2-5 per cent volume growth in FY2026: ICRA.
Rating agency ICRAprojects the Indian Mining and Construction Equipment (MCE) industry to displaya muted year-on-year (YoY) volume growth of 2–5 per cent in FY2026,corresponding to volumes of 1.43-1.47 lakh units.
Following thedecline witnessed in Q1 FY2026, ICRA anticipates an acceleration of new awardactivity in H2 FY2026, especially by the Government. Further, severalindustries are set to witness continued industrial and warehousing constructiondemand because of domestic market focus, thereby supporting volumes.Simultaneously, higher costs engendered by the construction equipment vehicles(CEV)-V norms1 are likely to dampen demand and squeeze OEM margins.
Providinginsights, Ritu Goswami, Sector Head, Corporate Ratings, ICRA, said, “Earlyonset of monsoons and unseasonal rains in some regions of the country disruptedthe construction and mining activities in Q1 FY2026, which is also reflected inthe flattish production data reported by Coal India Limited (the India’slargest miner) during this period vis-à-vis a year ago. The tepid new awardactivity and slowdown in road construction and Jal Jeevan Mission (JJM)projects has also hampered demand for the earthmover segment, which constitutesa bulk of the Indian MCE sector demand. Given the observed weakness in domesticdemand during Q1 FY2026, which is expected to persist into Q2 as monsoonconditions impact the construction sector, industry recovery hinges on theimproved traction in H2 FY2026.”
The Indian MCEindustry reported a marginal volume decline (1.0 per cent YoY) in Q1 FY2026 as perthe initial data released by the Indian Construction Equipment ManufacturersAssociation (ICEMA). While the domestic volumes contracted by 4.0 per cent YoY,a strong 31 per cent YoY growth in exports supported the overall sales duringthis period.
“The Government ofIndia has allocated INR11.2-lakh-crore for capital expenditure in FY2025-26,with major initiatives such as the JJM, PM Gram Sadak Yojna (PMGSY), and PMAwas Yojna-Gramin (PMAY-G) receiving renewed focus. Continued emphasis onsectors including transportation, water supply and sanitation, and irrigationis anticipated to result in an increase in new project awards and execution,thereby supporting domestic MCE demand. While certain private sector capitalexpenditure decisions may be deferred due to global headwinds, most industriesare expected to experience continued industrial and warehousing constructiondemand because of domestic market focus. Additionally, MCE export potentialremains strong. ICRA, therefore, maintains its volume forecast for FY2026 at2-5 per cent year-on-year growth, corresponding to volumes of 1.43-1.47 lakhunits,” said Goswami.
In Q1 FY2026, thegrowth of 31 per cent in exports was led by backhoe loaders, excavators, andskid steer loaders, which cumulatively accounted for 76 per cent of the totalexported volumes and saw a 34 per cent YoY growth. The United States is one ofthe top two MCE markets globally and ranks among the top five exportdestinations for India-manufactured MCEs and related components.
Althoughuncertainty surrounds the imposition of a 26 per cent reciprocal tariff by theUS on Indian exports, which could impact demand for select OEMs, opportunitiesin alternate markets continue to offer significant diversification potential. Hence,the tariff impact is not expected to be material for the industry.
“From January 1,2025, regulatory changes viz. CEV stage V emission norm transition andmandatory safety features became effective for wheeled construction equipmentin India. It has led to increased prices for compliant machines, which arelikely to be passed on to the customer (partly or fully) over the next fewquarters. This, coupled with seasonality in sales (generally slow during rainyseason) and subdued awarding activity for infrastructure projects, will weighon the domestic demand sentiments for the MCE industry during H1,” Goswamiadded.
In terms offinancial metrices, the aggregate revenue for the Indian MCE industry isexpected to have moderated to single digit YoY growth in Q1 FY2026, given theflat volumes. On the cost front, the higher cost of CEV-V compliance, coupledwith increased steel cost (due to safeguard duty imposed by the Government ofIndia on non-alloy and alloy steel flat products in April 2025) is likely tohave impacted the YoY profit margins during the quarter, as price hikes tooffset the impact are generally taken in a staggered manner. Notably, the largeplayers in this segment are all unlisted.
Despite themoderation, ICRA expects the credit profile of the OEMs to remain stable inFY2026, in the backdrop of low leverage and comfortable liquidity with mostplayers.
1 TheCEV emission norms in India are applicable for diesel powered engines used innon-road equipment and define emission limits on particulate matter, particulatenumber (CEV-V only), nitrogen oxide, hydrocarbon, and carbon monoxide.