Akin to the dance of democracy, the flux in the Indian economy has meted out mixed reactions from the construction equipment sector. The year 2020 will be year for consensus as many of them expect their businesses to gain ground in the New Year.

The Indian economy is in a state of flux, good news for some and trying times for others. This flux has made itself prevalent in the construction and construction equipment sector too and the industry stakeholders are navigating the slowdown in their own indigenous ways. For many 2020 will prove to be a silver lining on the cloud.

Meanwhile akin to a lazy amoeba, the economy seems to be protracting its misadventure and depending on individual political affiliations people have a different take on the causative factors.

In real estate many experts believe that the audacity to turn housing units into the most valuable business asset without paying any heed to market realities has led to unsold inventories. The purchasing power has shrunk and but project prices have shot up. Like the Chinese real estate bubble burst, a course correction may save the day but in a democracy, it remains to be seen how many souls in the echelons of power will make way for the desired dose of corrective measures needed.

As far as the infrastructure segment is concerned a lot remains to be done. VG Sakthikumar, Managing Director, Schwing Stetter India Pvt Ltd rightly points out “We cannot compare our development to many of the European and Asian countries because there is a big gap in infrastructure, which needs to be filled at any cost. So, when there is a big gap and when there is going to be a mechanised way of construction of doing that, it is not possible to avoid machines and do all this infrastructure activity in any other method. So, we need to have modern machines to build India. The 3-4 months of slowdown in the business should not make one question the fundamental background in which the country is operating at this current point of time.”

The journey from a developing nation to a developed nation ensues that the scope of work which remains is huge, so there is no dearth of business potential but the bottlenecks need to be addressed.

Debasis Bhattacharya, Head – Marketing, Sales & Product Support, Ajax Engineering Pvt Ltd, “Prior to 2014 all the national highway projects were under the BOT scheme, land acquisition which is a critical part of the project had to be managed by the respective builder or the infrastructure company. Land acquisition is a contentious issue and it is something that the government has to negotiate. Owing to this a lot of projects did not get a financial closure. The present government gave NHAI the power to acquire land whereas the contractor is required to participate in his capacities as an EPC contractor. In this model pumping in money remains a challenge even for the NHAI. So a hybrid model needs to be in place which includes a commitment from the government body, the private player and the banks. The idea is to create a win-win situation where no one loses.”

Demonetisation and GST have been consistently rallied as an abettor to the slowdown but that’s quite far from the truth. NBFC’s, bad loans and NPA’s are equally to blame. The debt crisis in IL&FS in fact adversely impacted growth of the NBFC sector in India. These issues unlike instant noodles take a lot of years to snowball and cause an avalanche. So the avalanche was incompetence and corruption at work, something that the existing government can do without.

Though most of the construction equipment manufacturers are in a cautious mode, in the crane segment, there is a reason to smile about.“The mobile cranes industry works in a slightly different manner from other equipment segments,” says Anil Bhatia, VP Sales and Marketing TIL Ltd, “Going by the market dynamics, 4-5 years back, it was 75-80 per cent for used equipment and 25-20 per cent for brand new. With the new emission norms in place, big contractors and government companies are no longer using any equipment which is more than 7-10 years old. This has created an opportunity for players like us. Going forward, this ratio is going to improve further towards more new equipment. Our order book is healthy and we actually have to expand our production facilities to keep up with the demand.”This success story also owes an allegiance to the strong financials of the clientele, many of whom were not affected the NBFC debacle.

Many economist who have hinted at a global recession believe much of it is owed to the consumption pattern in individual nations and this is where India scores some brownie points. Piero Guizzetti, CEO, MB Crusher India points out “India, at its worst, is still one of the fastest growing economies in the world. It’s going to have its hiccups. Every market that grows is going to have its ups and downs. But the long term story of India’s absolutely intact. India compared to other major global emerging economies is a market that is growing because of the domestic consumption instead of private consumption.”

Akin to an individual carving a niche for himself, the construction and construction equipment sector will have some self-doubts when the task becomes daunting. The play of power and polity on its part creates a lack of clarity and augments the issue further. Ratan Tata once said “Ups and downs in life are very important to keep us going, because a straight line even in an ECG means we are not alive.” The stakeholders of the construction and construction equipment sector need to realize that the existing flux in the economy will come to a close. In the meantime the government on it part, both the ruling parties and the opposition needs to ensure that the individual in the ICU doesn’t pass out.

The 3-4 months of slowdown in the business should not make one question the fundamental background in which the country is operating at this current point of time.
VG Sakthikumar, Managing Director, Schwing Stetter India Pvt Ltd

A hybrid model needs to be in place which includes a commitment from the government body, the private player and the banks. The idea is to create a win-win situation where no one loses.
Debasis Bhattacharya, Head – Marketing, Sales & Product Support, Ajax Engineering Pvt Ltd

India, at its worst, is still one of the fastest growing economies in the world. It’s going to have its hiccups. Every market that grows is going to have its ups and downs.
Piero Guizzetti, CEO, MB Crusher India

With the new emission norms in place, big contractors and government companies are no longer using any equipment which is more than 7-10 years old. This has created an opportunity for players like us.
Anil Bhatia, VP Sales and Marketing TIL Ltd