India is preparing a $1.2 billion incentive scheme to accelerate domestic manufacturing of high-value and technologically advanced construction equipment and other infrastructure machinery, as the government seeks to reduce dependence on imported machinery. The proposed seven-year program is expected to support local manufacturers of specialized equipment used in major infrastructure projects, including tunnel boring machines, firefighting systems and elevators for high-rise buildings.
The initiative could attract around $1.8 billion in fresh investment into the sector and deepen domestic manufacturing capabilities. The proposal comes as India expands spending on roads, metro rail, airports, highways and other infrastructure, creating growing demand for sophisticated machinery. The government is also seeking to build domestic capacity in areas where Indian companies have historically relied heavily on overseas suppliers, particularly China.
India Targets High-Value Construction Equipment Manufacturing
This proposal sits alongside India’s broader Make in India and PLI manufacturing push. A related example is L&T’s rare-earth magnet manufacturing plan, which also links policy support to domestic industrial capacity.
The proposed incentive program is focused on machinery that requires significant engineering capabilities and remains heavily dependent on imports. Tunnel boring machines, or TBMs, are among the most important products covered by the plan because they are increasingly required for metro rail projects, underground infrastructure and large tunneling projects.
Other equipment expected to fall within the program includes firefighting systems and elevators used in high-rise buildings. The government is also expected to establish local value-addition requirements, encouraging manufacturers to source more components and production processes from within India.
Key Numbers Behind The Proposed Scheme
| Metric | Figure |
|---|---|
| Proposed incentive program | $1.2 billion |
| Program duration | 7 years |
| Targeted fresh investment | $1.8 billion |
| Construction & infrastructure equipment market | ₹1 lakh crore / $10.5 billion |
| Chinese tunneling machinery imports, FY23 | $18 million |
| Chinese tunneling machinery imports, FY24 | $3 million |
| Chinese tunneling machinery imports, FY25 | $500,000 |
| Chinese tunneling machinery imports, FY26 | $800,000 |
| Market share in global mining & construction equipment industry | About 4% currently |
| Potential market share in five years | About 6.5% |
The figures illustrate both the size of the opportunity and the gap India is attempting to close. While demand for machinery is expanding alongside infrastructure investment, domestic manufacturing of some technologically complex equipment has not grown at the same pace.
Tunnel Boring Machines Are At The Center Of The Push
Tunnel boring machines have emerged as one of the clearest examples of India’s import dependence. TBMs are large and highly specialized machines used to excavate tunnels for metro systems, highways, railways and other underground projects.
China has historically been an important supplier of such equipment to India. However, trade and investment relations between the two countries became more complicated after the 2020 border clashes, when India introduced restrictions affecting Chinese investments and public procurement.
Chinese restrictions on TBM exports to India also affected supplies. In 2024, Chinese authorities began delaying customs clearances for some tunneling machinery shipments, adding to concerns about relying on foreign suppliers for strategically important infrastructure equipment.
Chinese Tunneling Machinery Imports
India's Imports From China
FY2022-23 $18.0M ██████████████████████████████
FY2023-24 $3.0M █████
FY2024-25 $0.5M █
FY2025-26 $0.8M █
Change from FY23 to FY26: About -96%
Although the decline in imports partly reflects restrictions and changing procurement conditions, it also highlights the government’s argument for developing domestic production capacity.
BEML, L&T And Johnson Lifts Could Benefit
The proposed program could create opportunities for companies already operating in India’s industrial and infrastructure equipment ecosystem.
State-owned BEML is planning to manufacture tunnel boring machines domestically, positioning the company as a potential beneficiary of incentives aimed at expanding local TBM production. Larsen & Toubro and Johnson Lifts are also among companies that could benefit from greater demand and policy support.
For manufacturers, government incentives could improve the economics of producing sophisticated machinery in India. High-end equipment often requires substantial upfront investment in engineering, specialized factories, testing infrastructure and supply chains.
The proposed incentives are therefore intended to make domestic production more commercially viable while encouraging companies to increase the share of locally produced components.
India’s Infrastructure Boom Is Driving Demand
India’s infrastructure expansion is creating a large and growing market for construction equipment.
Government spending on highways, metro systems, airports, ports and other projects requires a wide range of machinery, from conventional earthmoving equipment to highly specialized tunneling and lifting systems.
A report by Boston Consulting Group and the Confederation of Indian Industry has estimated that India’s share of the global mining and construction equipment industry has increased from around 2.5% to about 4%. The report expects India’s share to reach approximately 6.5% over the next five years.
Infrastructure Spending Creates Equipment Demand
| Infrastructure Segment | Equipment Demand |
|---|---|
| Metro rail | Tunnel boring machines, piling equipment, cranes |
| Highways | Earthmoving and paving equipment |
| High-speed rail | Specialized construction machinery |
| Airports | Material-handling and construction equipment |
| Ports | Large cranes and specialized handling systems |
| High-rise buildings | Elevators and firefighting systems |
This creates an opportunity for India to capture more value from its infrastructure spending by manufacturing a larger proportion of the equipment domestically.
Local Value Addition Could Strengthen The Supply Chain
One of the important elements of the proposed scheme is the focus on domestic value addition. Instead of simply assembling imported machinery in India, the government wants manufacturers to develop deeper local supply chains.
This could encourage investment in components, engineering systems and specialized manufacturing capabilities.
The approach is particularly important for sophisticated machinery because importing the majority of high-value components can limit the economic benefits of domestic assembly. Increasing local content could eventually help Indian manufacturers develop capabilities that can be used across multiple industrial sectors.
A stronger supplier ecosystem could also reduce lead times and make manufacturers less vulnerable to international trade disruptions.
The Policy Comes After Earlier Manufacturing Efforts
India has previously attempted to increase domestic production of advanced construction equipment, but some earlier efforts did not generate the desired scale of manufacturing.
The latest proposal represents a renewed push, with the government attempting to design incentives around the economics of producing equipment that is currently imported.
The program was announced in the 2026-27 Union Budget and has gone through inter-ministerial discussions. The Union Cabinet is expected to consider the proposal, after which industry consultations and implementation guidelines would determine how manufacturers qualify for support.
Potential Impact On Indian Manufacturers
If approved, the scheme could influence investment decisions across India’s construction equipment industry.
| Potential Impact | Expected Effect |
|---|---|
| Production incentives | Lower initial manufacturing risk |
| Local value-addition targets | More domestic component sourcing |
| $1.8B investment target | New factories and production capacity |
| Infrastructure demand | Larger domestic market |
| Reduced import dependence | Greater supply-chain resilience |
| Technology development | More advanced Indian manufacturing |
The benefits could extend beyond the companies directly receiving incentives. Component manufacturers, engineering firms, logistics providers and industrial suppliers could see additional demand as domestic production expands.
The China Factor Remains Important
Reducing dependence on China is an important strategic element of the proposal. India’s infrastructure plans require reliable access to specialized machinery, and disruptions in international supply chains can delay large projects.
At the same time, India has recently eased some restrictions affecting Chinese investment and participation in government contracts. This means the new manufacturing initiative is not necessarily aimed at eliminating imports entirely.
Instead, the policy appears designed to ensure that India has sufficient domestic capacity in strategically important equipment while giving local manufacturers a stronger opportunity to compete.
The Bigger Picture
India’s proposed $1.2 billion construction equipment incentive program reflects a broader shift in industrial policy: infrastructure spending is increasingly being used not only to build physical assets but also to create domestic manufacturing capabilities. Producing tunnel boring machines, elevators, firefighting systems and other sophisticated equipment locally could help India retain more economic value within the country while developing engineering expertise.
The success of the program will depend on whether incentives can translate into commercially competitive manufacturing rather than simply subsidized production. Companies will need to invest in technology, components, skilled workers and research capabilities, while the government will need to ensure that the program is implemented efficiently and rewards genuine increases in domestic value addition.
Looking Ahead
The immediate focus will be on Cabinet approval and the final structure of the incentive program. Once the guidelines are established, manufacturers will have greater clarity on investment requirements, local value-addition targets and the duration and scale of available support. The government’s ability to move quickly from policy announcement to actual factory investment will be critical to achieving the $1.8 billion investment target.
Over the longer term, the initiative could help create a stronger Indian ecosystem for advanced construction machinery at a time when infrastructure demand is rising rapidly. If domestic manufacturers successfully develop competitive TBMs, lifting systems, firefighting equipment and related technologies, India could gradually reduce its reliance on imports while positioning itself as a larger supplier of construction and infrastructure equipment in global markets.
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