India plans $1.2 billion incentive scheme to boost construction equipment manufacturing

India is set to approve a $1.2 billion incentive scheme to boost domestic manufacturing of high-value construction and infrastructure equipment, Reuters reported, citing two government sources.

The proposed seven-year scheme is expected to attract around $1.8 billion in fresh investment and support manufacturers of technologically sophisticated equipment such as tunnel boring machines, firefighting equipment and elevators used in high-rise buildings.

The move comes as India seeks to reduce its dependence on imports, particularly from China, for critical infrastructure machinery. Tunnel boring machines are widely used in metro rail, highway and other large infrastructure projects, but India currently relies heavily on overseas suppliers.

The proposed incentive programme would also introduce local value-addition targets for machinery that is currently fully imported, according to the sources cited by Reuters.

State-run BEML could be among the beneficiaries, with the company planning to manufacture tunnel boring machines domestically. Other potential beneficiaries include Larsen & Toubro and Johnson Lifts.

The government is expected to take a final decision on the scheme soon. India’s heavy industries and finance ministries did not respond to Reuters’ requests for comment.

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Push to cut China dependence

The proposed scheme is part of a broader government effort to build domestic manufacturing capacity and reduce dependence on critical imports.

India tightened restrictions on Chinese investments and public procurement following the 2020 border clashes between the two countries. China has also remained a major supplier of tunnelling and boring equipment used in India’s infrastructure expansion.

According to Reuters, imports of tunnelling machinery from China fell sharply from $18 million in 2022-23 to $3 million in 2023-24. They declined further to $500,000 in 2024-25 before rising to about $800,000 in 2025-26.

The decline followed restrictions and delays in customs clearances for tunnel boring machine shipments from China.

India has since gradually eased some restrictions on Chinese investment and allowed Chinese companies to participate in selected government contracts, but the latest incentive proposal indicates that New Delhi continues to prioritise building domestic manufacturing capabilities.

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, metros, airports and other infrastructure.