Mining & Construction Equipment Sector Saw 4% Decline in Volumes in June Quarter, Says ICRA

New Delhi, July 15, 2025: India’s Mining and Construction Equipment (MCE) sector recorded a marginal 4% year-on-year decline in domestic volumes during Q1 FY2026, as early monsoons and unseasonal rainfall disrupted operations across major infrastructure regions. This slowdown follows a robust FY2025 and signals a temporary pause rather than a structural weakness, as per a report by ICRA Ratings.

Despite the domestic lull, exports provided a critical cushion, registering a strong 31% YoY growth, driven by sustained demand from Africa, the Middle East, and Southeast Asia, according to preliminary data from the Indian Construction Equipment Manufacturers Association (ICEMA).

Key Factors Behind Q1 Slowdown

• Weather-Related Delays: Unexpected pre-monsoon showers across central and eastern India severely impacted earthmoving and road-building operations.
• Slow Government Tendering: Projects under major infrastructure schemes like Bharatmala Pariyojana, Jal Jeevan Mission, and PM Gati Shakti saw delayed execution and award finalisations.
• Coal Sector Disruption: Rain-induced delays in mining activities, especially in regions served by Coal India Ltd, resulted in near-flat production and affected off-highway vehicle sales.
• Dealer Destocking: Lower dealership inventory purchases in anticipation of the upcoming pre-election policy direction also contributed to the volume contraction.

Sector Snapshot

• Domestic MCE volumes fell 4% YoY in Q1 FY2026 due to early monsoons and project delays.
• Export growth remained strong at +31% YoY, cushioning overall performance.
• Earthmoving equipment segment-which forms the core of MCE demand-witnessed subdued sales.
• Infrastructure projects like Jal Jeevan Mission and road construction saw sluggish progress.
• Coal mining activity remained nearly flat due to rain-related disruptions at major sites.
• Dealer destocking affected Q1 volumes amid expectations of improved policy clarity post-elections.
• Overall sentiment is cautious for H1, with hopes pinned on H2 revival via government capex boost.

Industry Commentary

“Weak Q1 and expected Q2 softness are temporary. H2 FY2026 could witness strong momentum if government capital expenditure resumes pace post-monsoon,” said Ritu Goswami, Sector Head, Corporate Ratings, ICRA. “We estimate MCE volume growth at 2–5% YoY for FY2026, driven by second-half execution of pending infrastructure orders.”

Growth Drivers for H2 FY2026

1. Government Spending Revival: With state and general elections behind, the pace of infrastructure tender awards is expected to accelerate.
2. Private Capex Uptick: Real estate, logistics, and warehousing projects, especially in tier-2 and tier-3 cities, are showing signs of recovery.
3. PLI-Driven Manufacturing Growth: Projects under Production Linked Incentive (PLI) schemes are expected to push demand for construction machinery in industrial corridors.
4. Railway & Metro Projects: Significant allocations in the Union Budget FY2025-26 for urban mobility could drive demand for specialised equipment.
5. Digital & Smart Construction: Increased adoption of IoT-enabled, fuel-efficient, and electric equipment is likely to gain traction, especially from large EPC players.

Future Outlook

Despite a muted first half, the MCE sector’s long-term fundamentals remain strong, anchored by policy support, rising rural infra investment, and growing export markets. Execution speed, monsoon behaviour, and material inflation will be key variables in shaping the full-year performance.

ICRA’s forecast of 1.43–1.47 lakh unit sales in FY2026 implies steady but cautious optimism – a sentiment echoed by major OEMs (Original Equipment Manufacturers) such as JCB India, Tata Hitachi, L&T Construction Equipment, and Komatsu.

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