The Union Budget for FY27 is expected to introduce a major incentive programme of around ₹13,000 crore to strengthen domestic manufacturing of construction equipment, a sector considered critical for India’s expanding infrastructure pipeline.
The proposed incentive is aligned with the government’s broader push to accelerate infrastructure execution while reducing reliance on imported machinery. Despite consistently high capital expenditure allocations in recent years, delays in project implementation have often been linked to shortages and import dependence in specialised construction equipment.
Focus on High-Value and Critical Machinery
The incentive framework is likely to prioritise high-end and technologically complex construction equipment, particularly those that are currently imported in large volumes. These include tunnel boring machines used in metro and underground infrastructure projects, ropeway systems, cranes, backhoe loaders, and other heavy machinery essential for urban development, roads, and industrial construction.
In addition to complete equipment, the scheme may also extend to key components such as engines and transmission systems, which form a substantial portion of the import bill for the sector.
Emphasis on Domestic Value Addition
A key condition under the proposed incentive structure is expected to be minimum domestic value addition of around 50 percent. Manufacturers would be required to move beyond basic assembly operations and increase localisation of core components, including engine parts, electronic systems, and specialised steel structures.
This requirement is aimed at encouraging deeper manufacturing capabilities within India and supporting the development of a robust local supplier ecosystem. Currently, a large share of construction equipment sold domestically relies on imported components, particularly from China.
Supporting Infrastructure Growth and Manufacturing Depth
By linking incentives to localisation and advanced manufacturing, the government aims to achieve multiple objectives simultaneously. These include faster availability of critical equipment for infrastructure projects, reduced exposure to global supply disruptions, lower import dependency, and stronger domestic engineering capabilities.
If implemented in the upcoming Budget, the incentive programme could play a significant role in improving project execution timelines while positioning India as a competitive manufacturing hub for construction equipment in the long term.