Following a subdued start to FY2026, Rating agency ICRA projects a turnaround in the Indian mining and construction equipment (MCE) industry in the latter half of the year, driven primarily by renewed government-led capital expenditure.

"Given the observed weakness in domestic demand during Q1 FY2026--which is expected to persist into Q2 as monsoon conditions impact the construction sector--industry recovery hinges on the improved traction in H2 FY2026," said Ritu Goswami, Sector Head, Corporate Ratings, ICRA.

The report further reveals that the sector witnessed a muted performance in Q1 FY2026, with volumes dipping by 1 per cent year-on-year due to multiple headwinds, including early monsoons, unseasonal rainfall, and sluggish new project awards.

"Early onset of monsoons and unseasonal rains in some regions of the country disrupted the construction and mining activities in Q1 FY2026, which is also reflected in the flattish production data reported by Coal India Limited (the India's largest miner) during this period vis-a-vis a year ago," Ritu Goswami added.

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ICRA further believes that key government schemes such as the Jal Jeevan Mission (JJM), Pradhan Mantri Gram Sadak Yojana (PMGSY), and PM Awas Yojana-Gramin (PMAY-G) are set to receive increased attention and budgetary allocations under the ₹11.2 lakh crore capital expenditure plan announced in union budget for FY2025-26. This is likely to result in a revival in project execution and demand for MCEs.

The reports also highlighted that, in Q1 FY2026, the growth of 31 per cent in exports was led by backhoe loaders, excavators and skid steer loaders, which cumulatively accounted for 76 per cent of the total exported volumes and saw a 34 per cent YoY growth.

The earthmoving segment, which forms the bulk of domestic MCE demand, was particularly affected in Q1. Domestic volumes declined 4 per cent YoY, though exports offered some relief with a strong 31 per cent surge, led by backhoe loaders, excavators, and skid steer loaders.

While regulatory changes like CEV-V emission norms and rising input costs are expected to keep OEM margins under pressure, ICRA maintains its forecast of a 2-5 per cent volume growth for FY2026, translating to 1.43-1.47 lakh units. The long-term outlook remains positive, supported by strong export potential and a government-led infrastructure push. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)