The new government will have to start by unleashing a wave of reforms in multiple sectors, particularly in the infrastructure sector, which forms the backbone of the economy. The primary agenda is to debottleneck stalled infrastructure projects on ground and increase investment in the sector. This was observed by the Indian Construction Equipment Manufacturers Association.
“Infrastructure industry is pinning hopes on the new government. However, I feel the road from political stability to economic outcomes is rather a long one. The government will have to work on some underlying issues to ensure long-term and sustainable progress,” Amit Gossain, President, ICEMA, said.
According to a latest report by A.T. Kearney, infrastructure spending is expected to grow from 7.2 per cent of GDP in 2012 to 9 per cent by 2017. If the planned investment goes through, one can expect a turnaround in demand for construction equipment which primarily includes earthmoving equipment, concrete equipment, material handling equipment and road building equipment.
Earthmoving equipment (backhoe loaders, excavators, wheeled loaders etc.) is the largest segment of the construction equipment sector in India which is, like other segments, facing the heat of the economic slowdown.
For the concrete equipment sector, year 2013 was easily a forgettable one with construction at a virtual standstill. The demand for concreting machinery fell by 15-20 per cent year-on-year, and considering that 2012 itself had already been a negative year, this represented a decline of 30 per cent from the peaks the industry had reached in 2011.
“There is little doubt that India continues to be a potential growth story. 2014 is challenging for the industry; however, there are silver linings visible to the discerning eye. We are hopeful that infrastructure will be of prime focus for the government and we expect to see growth in the second half of 2014,” said Anand Sundaresan, Vice Chairman and Managing Director, Schwing Stetter (India).
Road equipment has seen considerable growth in the past few years. For the current financial year, NHAI plans to award 2,000 km through cash contracts and is ready with 3,000 km to be bid via PPP mode. With strong pipeline of road projects to be awarded by NHAI and state governments, the opportunities for the road equipment manufacturers are sizeable.