NEW DELHI: Indian mining and construction industry (MCE) industry is expected to display a muted year-on-year volume growth of 2–5% in FY26, corresponding to volumes of 1.43-1.47 lakh units, according to ICRA, a rating agency.
Following the decline witnessed in Q1 FY26, the agency anticipates an acceleration of new award activity in H2 FY26, especially by the government.
Higher costs engendered by the construction equipment vehicles (CEV)-V norms, are likely to dampen demand and squeeze OEM margins.
Ritu Goswami, sector head (Corporate Ratings), ICRA, said, “The tepid new award activity and slowdown in road construction and Jal Jeevan Mission (JJM) projects has also hampered demand for the earthmover segment, which constitutes a bulk of the Indian MCE sector demand. Given the observed weakness in domestic demand during Q1 FY2026—which is expected to persist into Q2 as monsoon conditions impact the construction sector—industry recovery hinges on the improved traction in H2 FY2026.”
The Indian MCE industry reported a marginal volume decline (1% year-on-year) in Q1 FY26 as per the initial data released by the Indian Construction Equipment Manufacturers Association (ICEMA). While the domestic volumes contracted by 4% year-on-year, a strong 31% year-on-year growth in exports supported the overall sales during this period.
In Q1 FY26, the growth of 31% in exports was led by backhoe loaders, excavators and skid steer loaders, which cumulatively accounted for 76% of the total exported volumes and saw a 34% year-on-year growth.
“From January 1, 2025, regulatory changes viz. CEV stage V emission norm transition and mandatory safety features became effective for wheeled construction equipment in India. It has led to increased prices for compliant machines, which are likely to be passed on to the customer (partly or fully) over the next few quarters. This, coupled with seasonality in sales (generally slow during rainy season) and subdued awarding activity for infrastructure projects, will weigh on the domestic demand sentiments for the MCE industry during H1,” Goswami added.
In terms of financial metrices, the aggregate revenue for the Indian MCE industry is expected to have moderated to single digit year-on-year growth in Q1 FY26, given the flat volumes. On the cost front, the higher cost of CEV-V compliance, coupled with increased steel cost (due to safeguard duty imposed by the Government of India on non-alloy and alloy steel flat products in April 2025) is likely to have impacted the year-on-year profit margins during the quarter, as price hikes to offset the impact are generally taken in a staggered manner. Notably, the large players in this segment are all unlisted.
