According to a Reuters report, India is preparing to approve a $1.2‑billion incentive plan aimed at boosting domestic production of high‑value construction and infrastructure equipment.

The initiative is designed to reduce dependence on China for critical machinery and is expected to be finalised shortly, according to government sources.

The scheme will run for seven years and is projected to attract $1.8 billion in fresh investment. It will provide incentives to Indian manufacturers producing technologically advanced equipment such as tunnel boring machines, fire‑fighting systems and elevators for high‑rise buildings.

The plan has been carefully structured after assessing the level of support required to make local production viable against the country’s current import dependence.

India has long struggled to build domestic capacity in tunnel boring machines, which remain heavily imported. China has been a key supplier of tunnelling equipment used in metro rail and highway projects.

This reliance has highlighted vulnerabilities in India’s infrastructure development, particularly as geopolitical tensions have disrupted supply chains.

The government under Prime Minister Narendra Modi is making a renewed push to reduce reliance on imports. Previous attempts to strengthen domestic manufacturing have not significantly altered the balance, but the new plan is intended to create a more sustainable industrial base.

The incentive scheme could benefit state‑run BEML, which has plans to manufacture tunnel boring machines locally, as well as private firms such as Larsen and Toubro and Johnson Lifts.

The plan will also set targets for local value addition in machines that are currently fully imported. This is expected to gradually build domestic expertise and reduce the need for foreign suppliers. A final decision is anticipated soon, though the heavy industries and finance ministries have not yet commented publicly.

India’s construction and infrastructure equipment market is valued at 1 trillion rupees ($10.5 billion). With the country accelerating investment in roads, metros, airports and other projects, demand for advanced equipment is expected to rise sharply. The incentive plan is therefore being positioned as a strategic intervention to ensure that domestic firms can meet this demand.

The issue of dependence on China has been particularly sensitive since the deadly border clashes of 2020. Following those clashes, India imposed restrictions on Chinese investments and public procurement.

In 2024, China retaliated by delaying customs clearances for tunnel boring machines bound for India, effectively restricting exports. Imports of tunnelling machinery from China fell sharply, dropping from $18 million in 2022‑23 to just $3 million in 2023‑24. They declined further to $500,000 in 2024‑25 and stood at $800,000 in 2025‑26.

The restrictions on tunnelling equipment were also raised in bilateral talks between the two countries last year. In 2026, India eased some restrictions on Chinese investments and allowed Chinese firms to participate in government contracts.

However, the incentive plan is intended to address the structural gap where India lacks sufficient manufacturing capability and remains highly dependent on imports.

The launch of the Thane‑Borivli tunnel boring machine by Maharashtra Chief Minister Devendra Fadnavis, who described it as an “engineering marvel,” underscores the importance of building indigenous capacity. Such projects highlight the scale of India’s infrastructure ambitions and the need for reliable domestic supply chains.

The incentive plan is therefore not just about reducing import dependence. It is about creating a robust industrial ecosystem capable of supporting India’s infrastructure expansion. By encouraging local firms to invest in production lines, technology and supply chains, the government hopes to ensure that future projects are not vulnerable to external disruptions.

Agencies