India weighs Rs.10,000 crore push to build critical construction gear at home

India is preparing a seven-year incentive scheme worth $1.2 billion to encourage domestic manufacturing of construction equipment, especially tunnel boring machines. The plan is aimed at reducing import dependence, drawing fresh investment and giving local firms a foothold in a segment dominated by overseas suppliers. The proposal comes against the backdrop of strained India-China trade ties and rising infrastructure spending at home, which has made reliable access to specialised machinery a strategic issue for policymakers.

India is preparing a fresh industrial intervention aimed at one of its most import-heavy infrastructure segments: construction equipment. The proposed move, if cleared, would place a seven-year incentive framework behind domestic production of high-value machinery that has long come from overseas suppliers, especially China, and could reshape a market that is becoming more central to India’s infrastructure build-out.

Policy push targets machines that shape India’s infrastructure boom

The plan under consideration carries an outlay of $1.2 billion and is designed to encourage local manufacturing of specialised equipment such as tunnel boring machines, fire-fighting systems and elevators used in tall buildings, government sources said. The objective is not merely to subsidise factories, but to build a deeper industrial base in categories where domestic capability remains thin and imports still dominate.

According to the sources, the scheme has been structured after assessing how much support would be needed to make local production commercially viable while also reducing dependence on imported machines. The proposal is expected to attract $1.8 billion of fresh investment over seven years, creating a longer runway for manufacturers that are willing to set up capacity in India.

Why tunnel boring machines are at the centre of the plan

Among the most strategically important items in the package are tunnel boring machines, a segment where India has remained heavily reliant on imported equipment. These machines are essential for metro rail projects, highway tunnels and other underground works, and China has been among the key suppliers in this space. The dependence has exposed a recurring weakness in India’s industrial ecosystem: the country has expanded its infrastructure ambition faster than its ability to manufacture some of the most complex machines needed to execute it.

The issue has become more sensitive in recent years. After the deadly border clashes between Indian and Chinese troops in 2020, New Delhi tightened restrictions on investments and public procurement from China. Later, in 2024, Chinese authorities are said to have slowed customs clearances for tunnel boring machine shipments bound for India, adding another layer of uncertainty to supply chains for large projects.

Imports of tunnelling machinery from China fell sharply, dropping to $3 million in 2023-24 from $18 million a year earlier, then declining further to $500,000 in 2024-25 and $800,000 in 2025-26, the government sources said. The numbers underline how geopolitical friction and trade controls have started to feed directly into infrastructure procurement decisions.

Domestic manufacturers could be the immediate winners

The incentive framework could open a window for Indian manufacturers that have either already signalled interest in the segment or have the scale to move quickly. State-run BEML is among the companies that could benefit, with plans to manufacture tunnel boring machines in India. Larsen and Toubro and Johnson Lifts are also expected to be in the frame, given their presence in engineering, construction and vertical transport equipment.

The scheme is also likely to include local value-addition targets for machines that are currently imported in fully built form. That suggests the policy is not only about assembling equipment domestically, but about pushing a larger share of components, sub-systems and engineering work into Indian factories over time. For policymakers, that distinction matters because it determines whether incentives create genuine industrial capability or merely encourage final assembly.

Broader industrial strategy meets a familiar import problem

The proposal fits into Prime Minister Narendra Modi’s wider effort to strengthen domestic manufacturing in sectors where India remains dependent on foreign suppliers. Earlier attempts to deepen local production in several strategic industries have delivered mixed results, leaving the government to revisit incentive-led approaches with more targeted design.

India’s construction and infrastructure equipment market is estimated at Rs.1 lakh crore, or about $10.5 billion, and is expected to keep growing as public spending rises on roads, metro systems, airports and related infrastructure. That growth makes the sector more attractive for suppliers, but it also raises the cost of continued import dependence. The more India builds, the more it needs machines that can be sourced reliably and competitively at home. In that sense, the proposed package is as much a supply-chain security measure as it is an industrial policy. If successful, it could reduce exposure to external disruptions, shorten procurement timelines for large projects and create a base of specialised equipment makers that can serve both domestic and export markets over time.

China ties, policy recalibration and the road ahead

The backdrop to the plan is also changing diplomatically. In 2026, India eased restrictions on investments by Chinese companies and gradually allowed Chinese firms to participate in government contracts, even as the earlier curbs on sensitive procurement remained part of the policy memory. The tunnel boring machine issue was also discussed in bilateral talks last year, reflecting how a niche industrial category can become a point of strategic negotiation between two large economies. For now, the final decision on the incentive package is still pending, but sources indicated that approval could come soon. The ministries of heavy industries and finance did not respond to requests for comment. If cleared, the scheme would mark one of India’s more focused attempts to localise a technically demanding segment of capital goods manufacturing, with the potential to influence how the country builds everything from metro corridors to high-rise urban infrastructure in the years ahead.

Kumaraswamy Urges Tech, R&D, Localisation in Construction

Union Minister HD Kumaraswamy recently urged the construction equipment manufacturers to keep investing in technology, R&D and localisation, saying India can become a leading global centre for technology in the sector.

Speaking at the Indian Construction Equipment Manufacturers’ Association’s (ICEMA) Annual Session 2026, the Minister of Heavy Industries and Public Enterprises of India said, “The Scheme for Enhancement of Construction and Infrastructure Equipment, announced in the Union Budget 2026-27, will help promote the manufacturing of critical equipment and components, strengthen our domestic supply chain, and reduce our dependency on imports”.

The minister said he is confident that with close collaboration between the government and industry, and urged ICEMA and its members to continue investing in technology, R&D and localisation, India can become a leading global centre for construction equipment manufacturing and technology.

On the occasion, Coal and Mines Minister G Kishan Reddy stated that India’s mining sector reforms over the past decade, moving to a transparent, auction-based system for allocating coal and mineral blocks, have helped bring greater investment, competition and technology into this space. And ICEMA and its member companies have been valuable partners in this journey.

He noted that sustained public capital expenditure, which has grown nearly four-fold since 2018, continues to create strong, long-term demand for construction and mining equipment.

“As an industry, our aim should not be to only manufacture in India, but to increasingly design, engineer and innovate here, building equipment not only for India but for the world,” he said.

The next phase of growth in mining will be driven by technology, artificial intelligence, drones, satellite mapping and modern equipment, he added.

Niti Aayog member R Balasubramaniam said that for a sector like construction equipment, growth cannot happen in isolation; it depends on the capacity of the larger infrastructure ecosystem to absorb what the industry produces, and on the skilled manpower needed to deploy it.

The government can create the enabling policy environment, but it is industry and associations like ICEMA that must see themselves as ecosystem creators, not manufacturers alone, he suggested.

ICEMA President and JCB India CEO and Managing Director Deepak Shetty stated that India’s construction equipment industry has emerged as a strategic pillar of the country’s infrastructure and manufacturing ambitions.

Mahmood Ahmed, Additional Secretary, Ministry of Road Transport and Highways, stated that the road sector commands the largest share of the government’s capital expenditure today, and the numbers speak for themselves: “our national highway network has grown to nearly one-and-a-half lakh kilometres in a decade, with construction pace roughly tripling in the same period”.

India continues to be the world’s third-largest construction equipment market, with the sector estimated at USD 10 billion in FY25 and projected to grow to USD 14.76 billion by 2030.

While the industry saw a temporary moderation in FY26, with total equipment sales at 1,36,995 units, a two per cent decline over FY25, driven by a seven per cent dip in domestic demand amid slower infrastructure execution, exports registered a robust 32 per cent growth over the same period, reinforcing the rising global competitiveness of Indian-manufactured construction equipment.

ICEMA projects the industry to return to growth in FY27, supported by the government’s continued capex push, including a public capex outlay of Rs 12.2 lakh crore, faster project execution, and the roll-out of the CIE Scheme.

Its Vision 2030 targets USD 3 billion in construction equipment exports, supported by greater market access, competitive trade policies and harmonisation of international standards.

Over 95 per cent of equipment sold in India continues to be manufactured domestically, underlining the industry’s deep localisation and its role as a key pillar of India’s Atmanirbhar Bharat and Make in India ambitions.