Increasing component localisation in India’s construction equipment sector is projected to create an annual business opportunity of approximately US$ 3 billion (Rs. 25,000 crore) by FY30, according to a credit rating agency ICRA report. The report forecasts that localisation levels will rise from 50% to over 70% in the next 5 to 7 years. Despite being the third-largest global market by volume, India imports nearly 50% of its component requirements from suppliers in China, Japan, South Korea, and other countries. Imported components include technologically advanced parts such as hydraulics, undercarriages, electronics like electronic control units (ECUs) and sensors, high-tonnage machinery, and certain grades of steel alloy.
The ICRA report attributes high import levels to the technological complexity of components and the need for large-scale manufacturing for economic viability. Sector Head of Corporate Ratings at ICRA, Ms. Ritu Goswami, emphasized that with India aiming to become a US$ 7 trillion economy by 2030 and prioritizing infrastructure investment, domestic demand for the MCE industry will remain robust. Enhanced localisation will mitigate geopolitical risks, improve operational efficiency, and generate more job opportunities. The report also highlights the ‘China+1’ strategy adopted by global OEMs to diversify supply chains. It suggests that while undercarriage components could be localized soon, electronic components may require more time due to their high R&D intensity.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.