A proposed incentive scheme for the country's construction equipment industry will target equipment categories that currently have less than 30 percent of content from India, or are not manufactured in India. These categories include pavers, graders, bulldozers, track loaders, and tunnel boring machines.
Shalabh Chaturvedi, Director of CASE Construction Equipment India and SAARC, discussed the scheme on the sidelines of the ICEMA Session 2026 in New Delhi on September 1. He stated that the incentive will trigger localization across the industry.
"The Construction Equipment incentive scheme under discussion can trigger production of equipment in India," Chaturvedi said. "The philosophy of the scheme is to incentivize localization of equipment which today are not manufactured in India or are barely manufactured in India."
Capital-Linked Incentive Scheme for Localization
The incentive program will run for a window of 5 to 7 years. It will use capital expenditure by manufacturers on machinery and equipment as the trigger. Once a company completes the investment threshold, the government will pay incentives as a percentage of revenue from sales in India and exports.
Infrastructure Gap
To support the localization of these machines, the government is working with the Automotive Research Association of India (ARAI) to expand testing infrastructure. Until very recently, manufacturers in India largely relied on testing centers in Europe or the United States to certify machines. ARAI has established safety testing facilities in Pune and Natrax in Indore, which have separate testing agency from those for automotive products.
Furthermore, the government and ARAI are planning a new greenfield testing center. This center will be designed from the ground up specifically for construction equipment, with a location under discussion near Bangalore.
"The moment those equipment start production in India, it will require a testing facility to validate them, test them, and certify safety and emissions compliance," Chaturvedi said. He added that the consultation with ARAI is ongoing to finalize the mechanics of the facility.
BS5 Alignment and $25 Billion Market
The expansion of testing infrastructure and localization is expected to boost exports of machines from India. India has implemented BS5 emission standards for construction equipment. Because these standards match or exceed standards in regions outside India, machines manufactured in India will qualify for export globally.
"Once you start manufacturing those in India, given the emission norms in India which are BS5, these machines will qualify for export anywhere in the world," Chaturvedi said.
According to industry projections, the construction equipment market in India can grow from $10 billion to $20-25 billion over a period of 5 years. The world market for construction equipment is $250 billion, representing an opportunity for exports from India.
"The world construction equipment market is almost $50 billion. The construction equipment market in India is only $10 billion," Chaturvedi said. He noted that the baseline in India will grow, and export markets will provide space for expansion.