We Expect The Growth Momentum To Sustain For The Current Fiscal Year 2023-24.
V Vivekanand, President, ICEMA and Managing Director, Caterpillar India
How is the construction equipment market gaining pace in India? What are the demand drivers?
As India is progressing towards attaining its goal of becoming a US$ 5 trillion economy, infrastructure continues to be the primary
driver of economic growth, and concomitantly, of growth in demand for construction equipment. The Indian construction equipment industry has seen tremendous amount of traction post-Covid, duly catalysed by the government’s thrust on infrastructure development through various flagship initiatives like NIP, GMP and NMP, since construction equipment comprises around 20% of the average project cost. The industry results for the last fiscal bear witness to this phenomenon, with CE sales crossing the 100K volume mark for the first time, recording an unprecedented 26% annual growth.
Projects worth Rs 108 trillion in the National Infrastructure Pipeline are the primary drivers of demand for construction equipment in the country. Besides roads and highways sector, which is the largest consumer of CE, these include one hundred critical transport infrastructure projects in the railways sector, including metro and high-speed rail; airports and heliports; as well as ports and waterways, for last mile connectivity. Additional demand drivers include increased activity in the rural infrastructure and urban reconstruction sectors. The ongoing spurt in demand for construction equipment at the back of infrastructure development is, thus, expected to continue in the near future as well and we expect the growth momentum to sustain for the current fiscal year 2023-24.
How are you going to meet the customer needs in a time-bound and cost-effective way? What could be the challenges and how will you tackle these challenges?
In view of the ongoing and expected spurt in demand for construction equipment in the economy, the industry needs to gear up to meet customers’ needs with due consideration to both timelines and cost imperatives. The industry, thus, needs to augment production capacity in tandem with improved productivity of its equipment. This would involve adoption of innovative and cost-effective technologies that can ramp up productivity of existing as well as new machines. In this context, Ministry of Heavy Industry’s Samarth Centres are extending facilities to MSMEs for easy access to technological up-gradation and converting their existing machines into smart machines for enhanced productivity. Further, the recently launched ICEMA CE Technology Vision Roadmap aims to serve as a guide to the industry for innovation and adaptation of new technologies to stay ahead of the curve in meeting future challenges for safer, more productive equipment which is also ecologically sustainable.
Additional challenges in meeting customers’ requirements could be constraints in the supply chain due to factors such as sudden increase in raw material prices, which would dent the cost effectiveness of our products, or disruption in availability of raw materials. ICEMA is making consistent efforts to strengthen the CE industry’s supply chain, especially working with tier 1 and tier 2 suppliers, to strengthen their capacities. ICEMA is working with policy makers towards building a local capacity and capability
through production linked incentives for the CE industry.
The industry’s high technology products and precision components, which will drive future trends, involve high technology aggregates and systems such as hydraulics, electronic controls, crawler motors, pumps, drives, engines, powertrain etc., which are largely being imported at present, and require considerable investment by the Indian manufacturers in the value chain to enable their domestic production. ICEMA is proactively undertaking policy advocacy on this issue and there are plans afoot for the GoI to offer incentivisation schemes to global partners for establishing their facilities for building the capacity and capability in India.
How will EXCON act as a platform of innovative technologies to attract customers? What are your expectations from the exhibition?
EXCON, the annual global exhibition and conferences on construction equipment and technology, which is South Asia’s largest event for construction equipment, is one of the key initiatives of Confederation of Indian Industries (CII) and showcases the best of equipment and technology available for modern infrastructure creation.
The upcoming EXCON 2023 in Bengaluru, the 12th edition of the event, is focused on the twin imperatives of AatmaNirbhar Bharat and Sustainability. The event will feature six country pavilions over 32,00,000 square feet of display area and will provide a platform to more than 1,400 companies from India and abroad. The event will additionally feature a series of conferences on infrastructure, components, AI, construction, etc.
This year, in view of its theme, the event is set to showcase technology and innovation across the value chain of CE industry across the world, with emphasis on building ecologically sustainable infrastructure for last mile connectivity and for improving quality of life, as well as on promoting India as a global manufacturing hub and outsourcing destination.
We at ICEMA have great hopes from EXCON 2023, which is expected to attract much higher footfall and participation, as one of the prime avenues of boosting visibility of the Indian CE industry, as well enhancing global networks to achieve the targets of CE Vision Plan 2030.
What kind of demand are you anticipating for construction equipment in future? What are the strategies needed to effectively serve the customers in future?
The Indian CE industry is on a high growth trajectory on the back of the government’s continued focus on infrastructure as the primary engine of economic growth in the country. The industry has consolidated upon the highest ever sales growth of 26% in FY23 with volumes crossing the 100K mark for the first time. In the present fiscal, there has been robust overall growth of 18% and 31% respectively in the first two quarters of FY24 and we confidently expect an overall growth of 15-20% for the year as a whole. While FY25 might witness a slowdown of as much as 5-10% due to general election related slowdown in projects, we nevertheless expect a rapid revival by FY26 due to the number of projects in the Rs 108 trillion National Infrastructure Pipeline, involving allocations of Rs 1.62 lakh crore to NHAI, Rs 2.40 lakh crore to Railways, one hundred critical transport infrastructure projects and heavy allocations to PM Awas Yojana and other schemes for rural infrastructure and urban reconstruction.
Currently, the Indian construction equipment industry stands at the third position globally, after the US and China. The record-breaking results of the previous fiscal, along with global recognition for our products and healthy growth of exports, have enabled us to consolidate our position and we are now a strong contender for the number 2 spot. This is also in alignment with the CE Industry Vision Plan 2030 of ICEMA which has set a goal of Indian CE industry becoming the world’s second largest and fastest growing CE industry, with 3X export growth and a market size of US$ 25 billion by 2030.
To enable that, the CE industry needs to not only augment capacity but also enhance the capability to provide solutions that enable world-class infrastructure development at record pace which can only be possible by embracing technology. It is with this objective that ICEMA has developed the Technology Vision Roadmap 2035 for the Indian CE industry, to outline the industry’s strategy for technological adaptation for the coming years. This is a holistic approach which embraces Safety, Solutions and Sustainability as three pillars of technology vision document.
