Budget FY27: What It Means for India鈥檚 CE Sector
The Union Budget 2026鈥�27 has delivered a clear and positive signal for India鈥檚 construction equipment (CE) industry, reinforcing infrastructure development and domestic manufacturing as central pillars of economic growth. At a time when the sector has been navigating demand moderation and global uncertainties, the Budget provides both short-term demand visibility and long-term strategic direction.
With public capital expenditure proposed at Rs 12.2 trillion for FY27, the government has reiterated its commitment to infrastructure-led growth. Large-scale investments in highways, railways, freight corridors, inland waterways, coastal logistics and urban infrastructure are expected to sustain project execution momentum across the country. For the construction equipment industry, this continuity in public spending is critical, as infrastructure remains the single largest demand driver for earthmoving, road construction, material handling and lifting equipment.
The emphasis on dedicated freight corridors, high-speed rail networks, national waterways and coastal connectivity is expected to improve logistics efficiency and reduce project execution costs. Faster and more efficient movement of materials will not only accelerate infrastructure creation but also improve equipment utilisation at project sites. Industry stakeholders believe this will translate into steady replacement demand and selective capacity expansion across equipment categories.
Equally important is the government鈥檚 focus on crowding in private investment through measures such as the proposed Infrastructure Risk Guarantee Fund. By addressing financing risks, the initiative is expected to encourage greater participation from private developers and EPC players, indirectly supporting sustained demand for construction equipment over the medium term.
The most significant takeaway for the sector is the announcement of a dedicated incentive scheme for Construction and Infrastructure Equipment (CIE) manufacturing. Long demanded by the industry, the scheme marks a shift in policy thinking鈥攔ecognising construction equipment not merely as a beneficiary of infrastructure spending, but as a strategic manufacturing sector in its own right. ICEMA has welcomed the move as a transformational milestone that will strengthen manufacturing and global competitiveness. The scheme is expected to encourage investments in advanced manufacturing technologies, automation, precision engineering and localisation of high-value components.
Currently, several critical sub-systems such as hydraulics, high-capacity engines, transmission systems and undercarriage components are largely imported. Targeted incentives could accelerate domestic capability development in these areas, reduce import dependence and enhance supply chain resilience. For OEMs, higher localisation levels can lead to lower production costs and improved export competitiveness.
The incentive framework is also expected to support the creation of a globally competitive supplier base in India. Beyond large OEMs, tier-1 and tier-2 suppliers, component manufacturers and technology providers are likely to benefit from investments and order visibility.
Deepak Shetty, President, ICEMA and CEO & MD, JCB India, has noted that the combined focus on infra development and equipment manufacturing will help build a high-technology ecosystem in India. Localisation of high-precision components and adoption of advanced manufacturing systems will strengthen domestic competitiveness while creating employment across the value chain.
From a technology perspective, the Budget鈥檚 broader focus on capital goods, semiconductors, electronics and precision components also aligns well with the evolving needs of the construction equipment industry, which is increasingly integrating digitalisation, automation and electronics into machines.
Ramesh Palagiri, President Designate, ICEMA and Managing Director & CEO, Wirtgen India, has pointed out that continued emphasis on infrastructure will help revive domestic demand, while the manufacturing incentive scheme will support long-term capacity and technology development. Together, these measures are expected to create a virtuous cycle of demand growth and manufacturing investment.
Echoing similar views, Sorab Agrawal, Executive Director, ACE, said recognising construction and infrastructure equipment as a critical growth enabler is essential for improving productivity and safety at project sites. According to him, policy support for the sector will also reduce import dependence and encourage adoption of advanced technologies across equipment categories.
Shalabh Chaturvedi, Vice President, ICEMA and Managing Director 鈥� India & SAARC, CASE Construction 每日吃瓜, noted that while trade agreements open access to global markets and technologies, the incentive scheme ensures manufacturing remains rooted in India. He said the combination creates a strong value proposition for global investors, strengthens supply chains and positions India as a hub for high-technology construction equipment.
The effectiveness of these measures will depend on timely implementation, clarity in scheme design and close collaboration between industry and government.
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