India Plans $1.2 Billion Manufacturing Push to Cut Dependence on Chinese Machinery

India is preparing a $1.2 billion incentive scheme to boost domestic manufacturing of high-value construction and infrastructure equipment, as the government seeks to reduce dependence on imports, particularly from China.

The proposed scheme is expected to encourage Indian manufacturers to produce sophisticated machinery such as tunnel boring machines (TBMs), fire-fighting systems and elevators, which are critical for the country's rapidly expanding infrastructure projects.

$1.2 Billion Scheme Aims to Attract Fresh Investment

The government is expected to offer incentives to domestic manufacturers over a period of seven years, with the scheme potentially attracting around $1.8 billion in fresh investment.

The focus is not merely on assembling imported equipment in India. The broader objective is to develop domestic manufacturing capabilities for advanced machinery and critical components.

A final decision on the proposed incentive programme is expected soon.

Why India Wants to Reduce Machinery Dependence on China

India's infrastructure expansion has increased demand for specialised construction equipment, particularly tunnel boring machines used in metro rail projects, highways and underground infrastructure.

However, India currently lacks sufficient domestic manufacturing capacity for several categories of advanced machinery, leaving major infrastructure projects dependent on foreign suppliers.

China has been among the important suppliers of tunnel boring machines and related equipment.

The supply vulnerability became more visible after India-China relations deteriorated following the 2020 border clashes. India subsequently tightened restrictions on Chinese investments and public procurement, while China reportedly slowed exports and customs clearances for some machinery shipments.

Imports of Chinese Tunnelling Machinery Declined Sharply

Imports of tunnelling machinery from China reportedly fell from $18 million in 2022-23 to $3 million in 2023-24.

They declined further to around $500,000 in 2024-25 before rising slightly to approximately $800,000 in 2025-26.

The fluctuations highlighted a key challenge for India's infrastructure ambitions: restricting imports alone cannot create an alternative domestic manufacturing ecosystem.

Without sufficient local capacity, major projects can remain vulnerable to supply disruptions.

BEML, L&T and Other Manufacturers Could Benefit

State-owned Bharat Earth Movers Limited (BEML) is among the companies that could potentially benefit from the proposed scheme as it explores opportunities to manufacture tunnel boring machines domestically.

Other major equipment manufacturers, including Larsen & Toubro and Johnson Lifts, could also benefit depending on the final structure and eligibility criteria of the incentive programme.

The government is expected to focus on encouraging companies to increase investment in:

• Research and development
• Advanced manufacturing technology
• Local supply chains
• Indigenous components
• High-value engineering capabilities

India’s Construction Equipment Market Is Growing

The proposed manufacturing push comes as India's construction and infrastructure equipment market continues to expand alongside major investments in roads, metro networks, railways, tunnels and urban infrastructure.

The market is currently estimated at around ₹1 lakh crore ($10.4 billion).

The government's broader objective is to move Indian manufacturers further up the technology chain and develop the capacity to produce complex machinery domestically rather than relying heavily on overseas suppliers.

If implemented, the scheme could support India's Make in India and manufacturing self-reliance goals while reducing supply-chain risks associated with dependence on a limited number of foreign suppliers.