India Targets China Dependence With $1.2 Billion Bet On Heavy Equipment

India is preparing to approve a $1.2 billion incentive programme aimed at boosting domestic production of high-value construction and infrastructure equipment, Reuters reported, citing two government sources.

The scheme, expected to be finalised soon, is designed to reduce India's dependence on China for technologically advanced machinery used in large infrastructure projects.

It could attract around $1.8 billion in fresh investment into domestic manufacturing, with incentives available over seven years, one of the sources told Reuters.

The proposed programme would cover equipment including tunnel boring machines (TBMs), firefighting systems and elevators for high-rise buildings.

India Targets Critical Machinery Imports

India remains heavily reliant on imports for tunnel boring equipment, with Chinese manufacturers among key suppliers of machinery used in metro, highway and other infrastructure construction.

The dependence has highlighted a broader gap in India's domestic manufacturing capabilities.

The government has been seeking to reduce reliance on strategically important imports, even as previous efforts to build local capacity have delivered limited results.

According to the Reuters report, the latest scheme has been designed after assessing the level of incentives required to make domestic manufacturing commercially viable against existing import dependence.

The programme is also expected to include local value-addition targets, particularly for machinery that India currently imports almost entirely.

Potential beneficiaries could include state-run BEML, which is planning to manufacture tunnel boring machines domestically, as well as equipment manufacturers such as Larsen & Toubro and Johnson Lifts, Reuters reported.

The final decision on the incentive package is expected shortly. India's heavy industries and finance ministries did not respond to Reuters' requests for comment.

China Dependence Remains A Key Concern

India's push comes against a backdrop of continuing tensions in economic ties with China.

Following the deadly 2020 border clashes, New Delhi tightened restrictions on Chinese investment and public procurement.

China subsequently introduced delays in customs clearances for tunnel boring machines shipped to India, according to Reuters.

Chinese tunnelling machinery imports into India fell sharply from $18 million in 2022-23 to $3 million in 2023-24. They declined further to $500,000 in 2024-25 before rising to $800,000 in 2025-26.

The availability of tunnel boring machines has also featured in bilateral discussions between India and China.

India eased some restrictions on Chinese investment in 2026 and gradually permitted Chinese companies to participate in certain government contracts, Reuters reported.

The latest incentive programme nevertheless seeks to address areas where domestic manufacturing remains insufficient and import dependence is particularly high.

Infrastructure Boom Creates A Market

The proposed scheme comes as India's construction and infrastructure equipment industry prepares for continued expansion.

The domestic market is currently valued at around ₹1 trillion ($10.5 billion) and is expected to grow as the government accelerates investment in roads, metro networks, airports and other infrastructure.

For New Delhi, the objective is therefore twofold: create a viable domestic manufacturing base for sophisticated machinery while reducing exposure to disruptions in critical imports.

The proposed incentives are intended to make that transition commercially sustainable by supporting investment and encouraging manufacturers to increase the share of equipment and components produced within India.