The construction equipment and earthmoving industry — traditionally seen as bellwethers of economic activity — has seen strong growth in the first half of this calendar year, an indication of optimism in business sentiment and a revival of economic activity, according to a top official at JCB India, one of the largest providers of such equipment in the country.
“De-growth in the sector started in April 2011 and went on until September 2015,” Vipin Sondhi, managing director and CEO of JCB India told The Hindu in an interview. “Then October to December 2015 was a period of flat growth. In the last six months, January to June, the industry has clocked a growth rate of more than 40 per cent.”
Business activity“People won’t buy the machines unless they are expecting to begin work soon,” Mr. Sondhi said. “This involves large capital investments. The actual digging of earth on the ground is a sign of business activity, not just new project announcements.”
The first five months of 2016 recorded sales of 21,869 units in the construction equipment sector as a whole, according to industry data shared by JCB, which represents a growth of 47.6 per cent over the same period of the previous year.
The growth in the sector accompanies an average 8.25 per cent growth over the same period in the cement category of the Index of Eight Core Industries as computed by the government. This is far stronger than the nearly flat average growth rate of 0.01 per cent seen in the sector in the January-May period of 2015, lending further weight to the assertion that the construction sector is seeing a revival.
Optimism“There is a business sentiment of optimism, but it has not yet translated in all industries,” Mr. Sondhi said. “Some of the bellwethers have started moving faster. The heavy commercial vehicles sector has grown, as has the construction equipment sector.”
However, the construction equipment sector is yet to recover to the highs of 2011, Mr Sondhi said. “The industry is likely to reach to that level by the next calendar year.” The sector sold 52,893 units that year, the data shows.
Now that the infrastructure sector — roads and highways — has started growing, the economy needs sectors like railways, real estate, and irrigation to start firing, Mr. Sondhi said. “It is then steel and cement can pick up and the wheels of the economy can really start moving.”
“But we need to be an investment-led economy,” he said. “Consumption is good, but is not enough for sustainable job creation.”
