Govt Plans $1.2 Billion Incentive Scheme To Boost Domestic Manufacturing Of Construction Equipment

India is preparing a major incentive programme to strengthen domestic manufacturing of high-value construction and infrastructure equipment, with the government likely to approve a $1.2 billion scheme soon.

The initiative is aimed at reducing the country’s dependence on imports, particularly from China, for technologically advanced machinery.

Under the proposed seven-year programme, manufacturers could receive incentives designed to attract around $1.8 billion in fresh investments.

The scheme is expected to cover equipment such as tunnel boring machines (TBMs), firefighting systems and elevators used in high-rise buildings.

Focus on reducing import dependence

India continues to rely heavily on imported tunnel boring equipment for large infrastructure projects, including metro rail networks, highways and other construction works. China has traditionally been an important supplier of such machinery.

The proposed scheme is being designed after assessing the level of support manufacturers would require to make domestic production commercially viable. It could benefit companies such as state-owned BEML, which has plans to manufacture tunnel boring machines locally, as well as equipment makers including Larsen & Toubro and Johnson Lifts.

The programme is also expected to include targets for increasing local value addition, particularly for machinery that is currently imported almost entirely.

Rising infrastructure spending creates opportunity

The proposed incentives come as India accelerates spending on roads, metro systems, airports and other infrastructure. The country’s construction and infrastructure equipment market is estimated at around ₹1 trillion, or approximately $10.5 billion, and is expected to expand further.

India’s dependence on Chinese machinery has remained a concern since the 2020 border clashes between the two countries, after which New Delhi introduced restrictions on Chinese investments and participation in public procurement.

China also imposed export-related restrictions on tunnel boring machines in 2024 by delaying customs clearances for shipments to India. Imports of tunnelling machinery from China subsequently declined sharply.