The Indian Construction Equipment (CE) industry experienced a 1% year-on-year decline and a 30% Q-o-Q drop in Q1 FY26 compared to Q4 FY25. Domestic sales were down by nearly 5% compared to Q1 FY25 and even lower than Q1 FY24. The industry’s performance across most equipment categories reflected a broad-based slowdown, driven by subdued domestic demand, particularly in key end-use segments like roads & highways and mining.
Regional disparities contributed to uneven demand, with some states experiencing a pickup in infrastructure activity while others saw significant deceleration. However, exports provided a bright spot, with a 34.5% year-on-year growth. The industry remains cautiously hopeful, but the next quarter may prove difficult unless infrastructure execution and construction activity see a significant uptick. The sector urges the Government to closely monitor the implementation of planned infrastructure projects, as these are crucial for sustaining demand in the CE space.
India’s construction equipment sector reported a 1% year-on-year (YoY) decline in overall sales during the first quarter of FY26, according to data released by the Indian Construction Equipment Manufacturers’ Association (ICEMA). This slight dip reflects subdued demand across key infrastructure and mining segments, despite ongoing government investments in mega projects under the National Infrastructure Pipeline (NIP) and PM Gati Shakti.
Segment-Wise Performance
As per ICEMA’s quarterly report, the earthmoving equipment segment, which comprises backhoe loaders and excavators, witnessed a minor contraction due to delayed project execution and prolonged monsoons in key markets. Road construction machinery, including compactors and pavers, also recorded a drop in volumes, reflecting a temporary slowdown in road and highway work, particularly in states facing post-election policy delays.
In contrast, material handling equipment, including cranes and forklifts, showed some resilience. The mining equipment segment, which is typically driven by coal and metal extraction, remained flat, impacted by regulatory bottlenecks and weather disruptions.
Factors Behind the Slowdown
According to ICEMA, the Q1 FY26 dip is primarily driven by muted private sector investments, delays in project tendering, and a high base effect from Q1 FY25. These challenges are further compounded by financing hurdles, such as rising equipment costs and high interest rates on loans for contractors. Road construction equipment, however, remained relatively stable, thanks to ongoing work under the (Baramulla Pariyojana) This comes at a time when India is also witnessing cautious capital expenditure from real estate and industrial sectors. Recent data on in H1 2025 reveals mixed activity in Tier 2 and Tier 3 cities, affecting demand for construction-related machinery.
Policy Support and Future Outlook
Despite the Q1 softness, ICEMA maintains a positive medium-term outlook. The association expects a recovery in H2 FY26, supported by faster fund disbursements and an anticipated pick-up in tender awards post-election. Government-driven programs such as the (Construction) along with urban infra pushes like Smart Cities Mission and Metro Rail Expansion, are expected to drive demand in upcoming quarters. Additionally, the infrastructure allocation of ₹11.11 lakh crore in Union Budget FY26 signals continued policy focus, which could rejuvenate equipment demand once project execution picks up.
Industry Voices
Industry leaders echoed similar concerns. Equipment manufacturers like JCB and Tata Hitachi have expressed cautious optimism, noting that demand may remain slow in Q2 FY26 but could revive by the festive season. They also highlighted the growing interest in electric and hybrid machinery, aligning with India’s sustainability goals and emission targets under Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policy.
Conclusion
While a 1% decline may appear marginal, it serves as a reminder of the volatile demand environment for construction equipment in India. ICEMA’s data suggests a recovery is likely, but much depends on timely project execution, private sector participation, and supportive financing mechanisms. As India gears up for its next phase of infrastructure transformation, the construction equipment industry will remain a critical enabler—and a sensitive barometer—of overall growth momentum.
q1. Why did construction equipment sales decline in Q1 FY26?
The dip is primarily due to sluggish demand from the infrastructure and real estate sectors, coupled with delayed project execution.
q2. How much did sales decline compared to Q1 FY25?
Sales dropped by 1% year-on-year in Q1 FY26, as reported by ICEMA.
q3. Which equipment segments were most affected?
Earthmoving and material handling equipment segments saw the sharpest declines.
q4. Is this decline expected to continue in upcoming quarters?
ICEMA anticipates recovery later in FY26, driven by government infrastructure push and improved liquidity.
q5. What does this mean for the construction industry?
The slight dip reflects short-term demand weakness, but long-term outlook remains positive due to ongoing capital expenditure by the government.
