India's mining and construction equipment (MCE) industry is expected to see an 8-10 per cent year-on-year recovery in volumes to 1.50 lakh units in 2026-27, after a 2 per cent decline in the previous financial year, according to rating agency Icra. The recovery is already visible with domestic volumes rising 14 per cent YoY and exports increasing 34 per cent YoY in the first five months of the current financial year. Local sales account for more than 80 per cent of volumes, while roughly 85-90 per cent of equipment purchased is financed. As reported by Icra, the growth is driven by strong infrastructure spending, rising exports, and increased government capital expenditure.
Operating margins for Icra's sample of 14 large MCE players are projected to moderate by around 100-150 basis points to 6-8 per cent in 2026-27, from 8.4 per cent in 2025-26. The pressure is expected to come from higher steel prices, elevated logistics costs and rising costs of imported components amid rupee depreciation. As reported by Icra, stiff competition and limited pricing flexibility could constrain the pass-through of this cost inflation. Despite expected margin pressure, Icra said the credit profile of original equipment manufacturers is likely to remain stable in 2026-27, supported by strong cash accruals, limited external debt and healthy coverage indicators.
The turnaround has been led primarily by the earthmoving segment, with backhoe loaders (BHL) and crawler excavators together accounting for more than 90 per cent of sales. BHL volumes rose 11 per cent YoY in the first five months of the current financial year, driven by improved project execution and higher infrastructure spending. Excavator volumes rose 4 per cent in 2025-26 and a further 17 per cent YoY in the current financial year, supported by sustained mining activity and increasing adoption of specialised equipment.
Exports have emerged as a key growth driver, rising 30 per cent YoY in 2025-26 and a further 34 per cent in the first five months of the current financial year. Export volumes' share nearly doubled to around 17 per cent, up from around 9 per cent in 2024-25. Earthmoving equipment accounted for around 75 per cent of exports, led by backhoe loaders, crawler excavators and skid steer loaders. The US remained the largest export destination at around 15 per cent of exports, followed by Africa at 7 per cent, Saudi Arabia at 5 per cent and the UAE at 4 per cent.
Government capital expenditure surged nearly 30 per cent in the first four months of the current financial year, while MCE retail registrations turned positive in July 2026. The recovery is expected to be supported by the government's ₹12.2 lakh crore capital expenditure programme, increased allocations for the Jal Jeevan Mission and Pradhan Mantri Gram Sadak Yojana, higher infrastructure funding for states and the proposed CIE scheme to deepen domestic manufacturing and localisation. Icra expects the 14 large MCE players in its sample to report 11-13 per cent YoY revenue growth in 2026-27, following a flat performance in 2025-26. The growth is expected to be supported by volume recovery, continued export momentum, modest price increases and a favourable product mix.
