The Indian mining and construction equipment (MCE) industry was severely hit by the economic slowdown, weak sentiments across user industries and tight liquidity conditions in 2008-09, resulting in a sharp 15-30% drop in demand across product segments.
The cumulative negative impact across industrial/ infrastructure investments resulted in a sharp decline in Indian MCE volumes in Q3, 2008-09. While Government funded infrastructure projects largely remained on track even during this downturn, a number of privately funded projects suffered due to insufficient credit and a sharp deterioration in the investment environment. In the mining industry, the metal mining segment (largely under the aegis of private companies) was affected by a sharp fall in commodity prices while coal mining (largely undertaken by the Government of India) supported demand to some extent. Growth in governmental segments of mining and roads, which are relatively more mechanised and thereby use more of MCE, supported growth during the past few quarters.
Indian MCE volumes started picking up in November 2009 and maintained a healthy growth over the past four months. The IIP index April-February 2010 posted a growth of 10.1% as against 3.0% in the corresponding period of the previous year. Infrastructure spending by the government, towards schemes like Pradha Mantri Gram Yojna and preparation for the 2010 Common Wealth Games, has been a strong demand driver, especially for the northern part of the country. The southern part of the country, which was hit by fall in iron ore and granite mining activity, also showed some signs of revival. However, the demand from the real estate segment (which impacts concreting equipment) continues to be relatively weak, particularly in the commercial real estate segment. Nevertheless, the longer term prospects for the segment remain healthy, with strong demand expected from the housing segment.
For a detailed note “INDIAN MINING AND CONSTRUCTION EQUIPMENT INDUSTRY: Strong growth prospects despite competitive pressures”, visit our website www.icra.in