Mumbai | Aug. 15, 2017: The domestic mining & construction equipment (MCE) sector could continue to see good times as infrastructure investments are expected to keep the demand momentum strong this calendar year.

This comes after a robust 35 per cent growth in the demand for MCE during the previous calendar year after four consecutive years of weak demand.

According to Icra, the domestic MCE industry will grow 13-17 per cent in the current calendar year and 8-10 per cent next year.

However, it expects growth in the sector to slow down to around 4 per cent in 2019 because of Union elections and high base effects. It added that during the current year, the growth in the sector has been marginally curtailed despite a strong jump initially. This was because the markets were temporarily affected by emission related ambiguity and GST during April and July, respectively.

"Infrastructure investments in roads, irrigation, railways and metro drove demand whereas coal and iron ore mining, power, oil & gas and real estate tempered demand," Icra said.

"Considerable improvement in average per day execution of National Highway Authority of India (NHAI) projects from 5.53 km in 2015-16 to 7.21 km in 2016-17; and sharply to 10.33 km in the fourth quarter of 2016-17 despite demonetisation helped. Also Indian Railways contributed significantly by incurring a capex of about Rs. 1.1 trillion during 2016-17 (92 per cent of proposed capex) on their various projects and has a further capex target of Rs. 1.3 trillion for 2017-18''.

The credit rating agency added that the sector outlook was improving given the over 20 per cent plus growth witnessed in the CE industry during the first quarter of the current calendar year. Moreover, the rapid correction in delinquency over the past fiscal also helped.

While higher infrastructure spend in roads raised equipment utilisation and the demand for new equipment, it led to a sharp reduction in the delinquency data for CE financiers from a peak of 10.8 per cent during the first half of 2015-16 to 7.6 per cent in March 2017.

Segment wise, road construction equipment, excavators and concreting equipment continues to witness strong demand so far this year.

Icra here said its forecast for each segment, based on specific demand drivers, indicates strong growth potential for the industry over the next year.

(Source: https://www.telegraphindia.com/)