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Construction equipment industry likely to witness 15-20% fall in revenues in CY20
May-19-2020

Rating agency ICRA in its latest report has said that the construction equipment industry, which was already going through a slowdown due to headwinds on several fronts before coronavirus (Covid-19) outbreak, is likely to witness a 15-20 percent fall in revenues in calendar year (CY) 2020, impacted by the extended the ongoing nationwide lockdown. 

The report noted that while construction activity on projects under execution was on, new project awarding activity was muted in the 12 months pre-Covid also. In particular, it said weak road project awards in the past few quarters severely reduced equipment demand prospects, as the single biggest driver for construction equipment demand in the past three years has been the roads sector. It said currently, the rate of awards is far slower than execution, leading to moderation in pipeline. In addition, problems like land acquisition delays, cost escalations and weak contractor liquidity affected demand. 

According to the report, factors like weakened state government finances, diversion of government support to healthcare at the cost of all other capital spends; new structural changes incorporating social distancing in several industries like construction; movement of labour; and the cost of restarting the economy - all these make the construction equipment industry forecast rather uncertain. Moreover, it said unforeseen headwinds in coming months cannot be ruled out.

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