Demand in mining, construction equipment to recover by fiscal end

 Demand in the mining and construction equipment industry will recover towards the end of the current fiscal followed by a sharp growth in next financial year, a report said on Tuesday.

The report by <g data-gr-id="21">ratings</g> agency ICRA said that 2016 promises to be a better year for most of the product segments as a result of the ongoing policy measures leading to absorption of surplus inventory in the market. "MCE (mining and construction equipment) industry will pick up towards the end of the current fiscal (October 2015 to March 2016), with demand for MCE expected to grow by 6-7 per cent during 2015-16, followed by a sharper pickup of 20-25 per cent during 2016-17," the report said. 

"Scale up in demand for MCE is often non-linear, with assured job orders and cash flows triggering strong buying, as construction activity <g data-gr-id="23">picks-up</g> momentum," it said. In the last one year, the government has announced several policy measures aimed at expediting project executions and fast-tracking approvals to kick-start investment cycle. However, the on-ground pace of movement has been impeded by variety of factors including sector specific constraints, demand dynamics, tight credit availability and high indebtedness of participants, the report said.

"In view of the near-term pain points; we expect demand to remain suppressed for another couple of quarters before project execution gathers momentum driven by initiation of works under contracts awarded over the last 12 months," the agency said. ICRA also said that developments in the coal mining sector provides some immediate <g data-gr-id="24">respite,</g> while execution in road projects remain slow. 

Nevertheless, ICRA has reiterated its strong long-term positive outlook for the Indian MCE industry driven by underlying demand potential for infrastructure development in the country and current low penetration level of MCE. 

The report also said that MCE demand during 2014 declined by over 15 <g data-gr-id="17">per cent</g> to 46,000-47,000 units from 72,100 units three years back in 2012.