Bucking the trend, the Indian Mining and Construction Equipment (MCE) industry reported a 5 percent growth year-on-year (YoY) in volumes in the April-June quarter, a report showed on Tuesday. As per the initial data released by the Indian Construction Equipment Manufacturers Association (ICEMA), the growth came while the industry was bracing for a contraction in domestic demand in the first half of this year, according to credit ratings ICRA.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

The report mentioned that this expectation was in line with the previous election cycles, driven by a slowdown in the new project award activity (due to the Model Code of Conduct in place on account of the Parliamentary Elections in April-June) and the monsoon-related impact on construction activities in Q2 FY2025.

Nonetheless, the performance in Q1 reflects customer optimism over the government's sustained focus on infrastructure development and the consequent impact on MCE demand “With renewed confidence regarding policy stability towards infrastructure-fuelled economic development, the new project award activities (and MCE volumes) are expected to ramp up faster than previously anticipated in H2 FY2025,” said Ritu Goswami, Sector Head - Corporate Ratings, ICRA.

In Q1, the growth in domestic sales was driven by the earthmoving and concreting equipment segments, which saw 5 percent and 8 percent YoY growth, respectively. The road, material handling, and material processing equipment segments reported flattish volumes, according to the data. Road construction drives 35-45 percent of MCE sales in the country, followed by mining (20-30 percent share), real estate (10-20 percent), and others.

The report said that going forward, the healthy outlay in the Union Budget for the Jal Jeevan Mission, the PM Gram Sadak Yojana, and the PM Aawas Yojana – schemes which have been among the major drivers for new equipment demand – is a positive move. While a pick-up in state government capex could yield a faster turnaround in construction activity/MCE volumes, given the severity of the monsoons in several states so far, the same will be more ascertainable only after a few months, the ICRA report noted.