India plans $1.2 billion push to build construction equipment at home

India is preparing a major incentive programme to strengthen domestic manufacturing of high-value construction and infrastructure equipment, as the country looks to reduce its dependence on imports for critical machinery used in major projects.

According to two government sources cited by Reuters, the proposed scheme is worth around $1.2 billion and could attract nearly $1.8 billion in fresh investment over seven years. The plan is expected to support Indian manufacturers of technologically advanced equipment, including tunnel boring machines, high-rise lifts and firefighting systems.

The move comes as India continues to expand spending on roads, metro systems, airports, highways and other large infrastructure projects. The growing project pipeline is creating strong demand for specialised machinery, but domestic manufacturing capacity remains limited in several high-value segments.

Tunnel boring machines are a key example. These machines are essential for building underground metro networks and tunnels, including projects in challenging terrain. India remains dependent on imported equipment, with China historically among the major suppliers. Reuters reported that imports of tunnelling machinery from China have fallen sharply in recent years, highlighting the supply-chain challenges facing the sector.

The proposed incentives are intended to change that equation by encouraging companies to invest in local production and technology. The scheme would also introduce local value-addition targets for equipment that is currently fully or largely imported.

State-owned BEML is among the companies that could benefit. The company already operates in mining, construction and infrastructure equipment and has plans to develop tunnel boring machines domestically. Other potential beneficiaries include Larsen & Toubro and Johnson Lifts, according to Reuters.

The policy push also builds on the government’s broader effort to develop India’s capital-goods and heavy-engineering ecosystem. The Union Budget 2026-27 had already announced a Scheme for Enhancement of Construction and Infrastructure Equipment, aimed at strengthening domestic production of high-value and technologically advanced equipment.

For India’s infrastructure sector, the significance goes beyond simply replacing imported machinery. A stronger domestic equipment ecosystem could create demand for Indian component manufacturers, engineering firms, technology suppliers and maintenance companies. It could also help build technical expertise and improve supply-chain resilience as infrastructure construction expands.

The proposed scheme is therefore closely linked to India’s next phase of infrastructure growth. Faster roads, metros and urban projects require not just more investment, but also reliable access to the machinery needed to build them.

The government is expected to take a final decision on the incentive plan soon.