India is set to approve a $1.2 billion incentive scheme to support the manufacturing of high-value and technologically sophisticated construction and infrastructure equipment, according to two government sources.
The move is aimed at reducing India’s dependence on China for critical machinery and strengthening domestic manufacturing capabilities in the sector.
The scheme is expected to be finalised soon and aims to attract around $1.8 billion in fresh investment by providing incentives to domestic manufacturers over a period of seven years.
The proposed incentives will cover equipment such as tunnel boring machines, fire-fighting equipment and elevators used in high-rise buildings, one of the sources said.
The initiative is expected to encourage investment in advanced equipment manufacturing and strengthen India’s domestic supply chain for critical infrastructure machinery.
Focus on Reducing Import Dependence
India continues to rely heavily on imported tunnel boring machines, with China among the key suppliers of tunnelling and other boring equipment used in metro rail and highway construction, according to a Reuters report.
The dependence highlights the challenges India has faced in developing domestic manufacturing capabilities for critical construction and infrastructure machinery.
Push for Domestic Manufacturing
The government of Prime Minister Narendra Modi is making a renewed push to reduce reliance on key imports, even as previous efforts to strengthen domestic manufacturing have had limited impact.
The proposed incentive scheme has been designed after assessing the support required to make local production of high-value construction and infrastructure equipment commercially viable against the country’s existing dependence on imports, the sources said.
Potential Benefits for Indian Manufacturers
The proposed incentive scheme could benefit state-owned BEML, which has plans to manufacture tunnel boring machines domestically. Other equipment manufacturers, including Larsen & Toubro and Johnson Lifts, could also benefit from the plan.
The scheme is also expected to include local value addition targets for machines that are currently fully imported.
A final decision on the incentive plan is expected soon, according to both government sources. India’s federal heavy industries ministry and finance ministry did not respond to requests for comment.
Manish Mathur, CEO – Cranes, ACE – Action Construction Equipment said, “At a time when Indian government is prioritising self-reliance in manufacturing and reducing dependence on imports, such incentives can provide a significant impetus to homegrown manufacturers by enabling greater investment in technology, R&D and indigenisation. Equally, appropriate anti-dumping measures on Chinese equipment would be strategically important to ensure a level playing field and complement these policy efforts”.
Growing Infrastructure Equipment Market
India’s construction and infrastructure equipment market is valued at around Rs 1 trillion ($10.5 billion) and is expected to expand as the country increases spending on roads, metro rail, airports and other infrastructure projects.
Reducing Dependence on China
India’s efforts to strengthen domestic manufacturing come amid continued dependence on Chinese equipment and machinery.
Following the deadly border clashes between Indian and Chinese troops in 2020, New Delhi imposed restrictions on investments and public procurement from China.
In 2024, China gradually imposed restrictions on exports of tunnel boring machines by delaying customs clearances for shipments to India. Imports of tunneling machinery from China dropped to $3 million in 2023-24 from $18 million a year earlier. They fell further to $500,000 in 2024-25, and were $800,000 in 2025-26.
The issue of easing restrictions on tunnel boring machines also figured, opens new tab in bilateral talks between the two countries last year. In 2026, India eased restrictions on investments made by Chinese companies and gradually allowed Chinese firms to participate in government contracts. The incentive plan aims to address the gap where India does not have sufficient manufacturing capability and has high import dependency, the first source said.
Mathur finally added that, “The construction equipment sector is targeting to become the world’s second-largest market by 2030, with the market expected to grow from around $10 billion currently to $14.76 billion, according to ICEMA. Together, these measures encourage Indian manufacturers to move further up the technology curve, build globally competitive products and scale India’s position as a reliable global hub for construction equipment manufacturing.”