ICRA NSE -2.94 % on Tuesday said the mining and construction equipment industry is likely to grow by 15-20 per cent in the calendar year 2021 but stressed that the economy, in the grip of a pandemic, could throw up sudden negative surprises.
"Following a 10-12 per cent contraction in CY2020, dragged down primarily by the 39 per cent decline in H1 CY2020, the mining and construction equipment (MCE) industry is poised to grow by 15-20 per cent in CY2021 (5-10% in FY2022)," it said.
While overall equipment demand will be strong in 2021, partly due to the low base of 2020, volatility in demand is likely, with a strong first quarter, a relatively subdued second quarter in the grip of the second wave, and the emission related pre-buy pick-up and post-buy slump in the third and fourth quarter of 2021.
"Support to ICRA's equipment demand estimates originates from - the GoI (Government of India) continuing its ‘Build India' momentum to counter the economic slowdown and the ample liquidity in the ecosystem. Tailwinds from any pick up in state capex, compared to the pullback in FY2021, and strong construction activity picking up in other sectors like ports, metros, and airports, could aid demand.
"On the contrary, demand can be hit by the Covid second wave restricting mobility and equipment utilisation for a prolonged period, which in turn could result in an increase in delinquencies and lender pull-back and a likely equipment price increase of 5-10% for the emission norm change," Pavethra Ponniah, Vice-President and Co-Group Head, ICRA said.
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