India is set to approve a $1.2-billion incentive scheme for manufacturing high-value and technologically advanced construction and infrastructure equipment, as the government seeks to reduce the country’s dependence on China for critical machinery, according to two government sources cited by Reuters.The scheme, which is expected to be finalised soon, aims to attract around $1.8 billion in fresh investment by offering incentives to domestic manufacturers over seven years, one of the sources said.The proposed scheme will cover equipment such as tunnel boring machines (TBMs), fire-fighting equipment and elevators used in high-rise buildings.
India seeks to build domestic manufacturing capacity
India remains heavily dependent on imported tunnel boring machines, with China among the key suppliers of tunnelling and boring equipment used for metro rail and highway construction.The new scheme has been designed after assessing the incentives required to make domestic production viable, taking into account India’s existing dependence on imports, the sources said.The plan will also include local value-addition targets for machines that are currently fully imported.The scheme could benefit state-run BEML, which plans to manufacture tunnel boring machines domestically, as well as equipment makers including Larsen & Toubro and Johnson Lifts, according to Reuters.The Union Cabinet is expected to consider the scheme soon. An ET report last month said inter-ministerial discussions had been completed and that approvals were expected by the end of August.The scheme was announced in the 2026-27 Union Budget to strengthen domestic production of high-value, technologically advanced construction and infrastructure equipment.Finance minister Nirmala Sitharaman had said the equipment covered could range from “lifts in a multi-story apartment, fire-fighting equipment, large and small, to tunnel-boring equipment for building metros and high-altitude roads.”
China remains key supplier of tunnel boring equipment
India’s dependence on Chinese machinery has been a particular concern in the tunnel boring segment.After the 2020 border clashes between Indian and Chinese troops, New Delhi imposed restrictions on investments and public procurement from China.China also imposed restrictions on exports of tunnel boring machines to India in 2024 by delaying customs clearances for shipments.Imports of tunnelling machinery from China fell from $18 million in 2022-23 to $3 million in 2023-24. They declined further to $500,000 in 2024-25, before rising to $800,000 in 2025-26, as per data cited by Reuters.The issue of easing restrictions on tunnel boring machines also featured in bilateral talks between India and China last year.India eased some restrictions on investments by Chinese companies in 2026 and gradually allowed Chinese firms to participate in government contracts.
Infrastructure push drives equipment demand
India’s construction and infrastructure equipment market is valued at around 1 trillion rupees ($10.5 billion) and is expected to expand as the country accelerates spending on roads, metros, airports and other infrastructure.The growing infrastructure pipeline is also driving demand for specialised machinery such as tunnel boring machines and large cranes.A Boston Consulting Group-CII report said India’s share of the global mining and construction equipment industry had doubled from around 2.5% to 4% and was expected to reach about 6.5% over the next five years.The report said roads, railways, ports and airports were driving demand for different categories of specialised construction equipment.
