The Indian mining and construction equipment (MCE) industry is projected to record a modest volume growth of 2–5 per cent year-on-year in FY2026, translating to total volumes of 1.43–1.47 lakh units, according to rating agency ICRA. This outlook comes on the heels of a weak Q1 FY2026, marked by early monsoons, unseasonal rains, and sluggish project awards.
ICRA anticipates an improvement in the second half of FY2026, driven by a pickup in new project awards, especially from the Government, and sustained demand from sectors such as industrial and warehousing construction, supported by a domestic market focus. However, the introduction of CEV-V emission norms and mandatory safety features from January 2025 has led to cost increases, which may dampen short-term demand and pressure OEM margins.
Providing insights, Ritu Goswami, Sector Head, Corporate Ratings, ICRA, stated, “Early onset of monsoons and unseasonal rains in some regions of the country disrupted the construction and mining activities in Q1 FY2026, which is also reflected in the flattish production data reported by Coal India Ltd.”
As per data released by the Indian Construction Equipment Manufacturers Association (ICEMA), the industry recorded a marginal volume decline of 1 per cent YoY in Q1 FY2026. While domestic sales fell by 4 per cent YoY, export volumes surged 31 per cent during the same period, led by backhoe loaders, excavators, and skid steer loaders, which together accounted for 76 per cent of total exports.
Government initiatives remain a key growth driver. The Union Budget for FY2025-26 allocated Rs 11.2 lakh crore for capital expenditure, with flagship schemes such as Jal Jeevan Mission (JJM), Pradhan Mantri Gram Sadak Yojna (PMGSY), and PM Awas Yojna-Gramin (PMAY-G) receiving renewed attention. Continued emphasis on transportation, water, and sanitation projects is expected to aid demand recovery in the latter half of the year.
While regulatory changes and seasonality are expected to weigh on H1 demand, ICRA maintains its FY2026 volume forecast. Export prospects also remain positive despite uncertainties around US tariffs, as diversification into alternate global markets continues to cushion the impact.
On the financial front, the industry’s revenue growth is estimated to have moderated to single digits in Q1 FY2026, reflecting flat sales volumes. Meanwhile, compliance costs linked to CEV-V norms and higher steel prices—following the safeguard duty on flat steel products imposed in April 2025—have likely eroded profit margins during the quarter. Nonetheless, ICRA expects the credit profile of OEMs to remain stable, supported by low leverage and healthy liquidity among major players.