ICRA Projects Muted 2–5% Growth for India’s Mining & Construction Equipment Industry in FY26

Rating agency ICRA predicts a 2-5% YoY volume growth for India’s mining and construction equipment (MCE) industry in FY2026, resulting in sales of 1.43-1.47 lakh units. The industry experienced a slowdown in Q1 FY2026, but ICRA expects a pick-up in new project awards in the second half of the fiscal year, particularly from the government. The continued demand for industrial and warehousing infrastructure, driven by a domestic market.

Focus, will provide further support to equipment volumes. However, rising costs due to the implementation of CEV-V emission norms are expected to dampen demand and compress OEM margins, posing a key challenge for the industry in the near term. The Indian MCE industry reported a marginal volume decline in Q1 FY2026, but a strong 31% YoY growth in exports supported overall sales. The government has allocated Rs. 11.2 lakh crore for capital expenditure in FY2025-26, with major initiatives like the Jal Jeevan Mission and PM Gram Sadak Yojana receiving renewed focus.

ICRA has forecast a modest 2–5% year‑on‑year volume growth for India’s Mining & Construction Equipment (MCE) sector in FY2026, driven by a combination of headwinds and cautious optimism around infrastructure spending. The Times of India

Market Headwinds Impacting Growth

Several factors are expected to suppress growth:

• Early and erratic monsoon rains during Q1 FY26 disrupted construction and mining activity, delaying projects nationwide. Construction
• Delayed awarding of infrastructure contracts, including road development and rural schemes, weighed heavily on domestic demand for equipment.
• New regulatory norms from January 2025—including CEV Stage V emission standards and mandatory safety features—have increased equipment prices, suppressing buyer sentiment in the near.

Q1 FY26 Performance: Dampened Domestic Volumes, Strong Exports

Industry data from ICEMA shows a 1% overall volume decline in Q1 FY26, with domestic sales down 4%. However, exports surged 31%, bolstered by strong demand for backhoe loaders, excavators, and skid-steer loaders, which account for roughly 76% of export volumes.

Outlook for H2 FY26: Navigating Via Government Capex

ICRA expects demand to pick up in H2 FY26, driven by:

• The centre’s ₹11.2 lakh crore capital expenditure outlay, covering key programs like Jal Jeevan Mission (JJM), PMGSY, and PMAY‑Garmin, which should spur returns in equipment demand.
• Renewed tendering activity in sectors such as mining, transportation, and irrigation, anticipated to support a rebound in domestic MCE sales.

Segment-Level Trends & Export Strategy

Within the sector:

• Earthmoving equipment saw a rebound of around 5% growth, while most other sub-segments posted flat or declining returns during the fiscal year.
• Though domestic demand remains soft, exports remain a strong cushion, with key markets outside the US helping diversify potential downside risk from proposed trade tariffs.

Long-Term Potential: Localisation & Structural Growth

ICRA notes the Indian MCE industry had grown at a 12% CAGR between FY15 and FY24, reaching sales of 1.36 lakh units in FY2024. Furthermore, the sector is expected to evolve into a US$ 25 billion market by 2030, with localisation levels rising to 70–80%—a move expected to boost export competitiveness and reduce foreign exchange outflows.

Conclusion: Recovery Likely in Second Half

While growth in FY26 is expected to be muted at 2–5%, the outlook remains cautiously optimistic as government-driven infrastructure projects gain traction in the second half of the fiscal year. Export demand provides a healthy buffer, and evolving regulatory compliance signals longer‑term institutional strengthening and market consolidation.