The construction equipment industry sees two emerging categories — infrastructure development in rural India and the creation of a strong healthcare system — as growth drivers in the coming years, even as the industry sees green shoots with the revival of infrastructure projects.
“Rural India is set to emerge as a strong growth driver, especially with the recent push by the government through programmes such as PMGSY (Pradhan Mantri Gram Sadak Yojana),” says Deepak Shetty, CEO and Managing Director, JCB India.
Schools, colleges and industries have to be built in the rural areas and segments such as roads and infrastructure are set to witness activity. This will drive more construction activity. In the post-lockdown period, it was rural India that spurred demand for many categories, including construction equipment.
“Yes, rural infrastructure development has been a key driver for the recovery in the CE industry since Q2. Rural roads under PNGSY have witnessed a lot of activity. MNREGA also has been channelled into mechanical equipment in few States. This apart rural housing has also seen strong traction,” says Subrata Ray, Senior Group Vice-President, Icra.
Meanwhile, Covid-19 has necessitated the need for robust health infrastructure. Higher allocation of expenditure for health and its sustainable development is a must. It is now about 1.3 per cent of GDP and needs to be stepped up to 5 per cent in the long run.
Vision for healthcare
“From a healthcare infrastructure perspective, we need to revolutionise the sector with world-class ground healthcare facilities . Hospitals, institutes, research facilities, among others, have to be scaled up, all of which would again drive the demand for smart construction equipment,” adds Shetty.
Industry representatives indicate that after the immediate focus on protecting lives and livelihoods, the medium-to-long term vision would be around structural investment in health, starting from health education.
“The recovery in the CE industry has been surprising and sharp since July 20. While part of the growth is optical, coming on a low base of the year, early recovery in the rural economy and strong road activity have spurred growth in the industry, says Ray.
A recent ICRA survey with CE dealers indicated a healthy improvement in demand for new machines; the dealers hope to register volume growth for FY21. Overall, healthy funds flow from the Government and ongoing projects are expected to support demand during H2 FY21, after sizeable volume contraction during H1 FY21.
Roads and highways will continue to play a key role in aiding the growth of the CE industry. The government is giving a massive push to infrastructure development by allocating about $1.4 trillion to be invested until 2025.
Also, about $350 billion is expected to be invested in road infrastructure in the north-east region during 2020-25.