The Indian mining and construction (MCE) industry experienced a year-on-year (YoY) volume growth of 2 to 5 per cent in the first quarter of FY26, according to a report released on Tuesday.

The volumes are expected to range between 1.43-1.47 lakh units, which is a marginal decline of 1 per cent YoY in Q1 FY2026 as per the initial data released by the Indian Construction Equipment Manufacturers Association (ICEMA), an ICRA report said.

While the domestic volumes contracted by 4 per cent YoY, a strong 31 per cent YoY growth in exports supported the overall sales during this period, the report noted.

ICRA anticipates an acceleration of new award activity in the second quarter of FY2026, especially by the government.

Going forward, industries will witness continued industrial and warehousing construction demand, which will support the growth in MCE volumes, the report said. Similarly, higher costs engendered by the construction equipment vehicles (CEV)-V norms are likely to dampen demand and squeeze OEM margins.

“Early onset of monsoons and unseasonal rains in some regions of the country disrupted the construction and mining activities in Q1 FY2026, which is also reflected in the flattish production data reported by Coal India Limited during this period," said Ritu Goswami, Sector Head, Corporate Ratings, ICRA.

The tepid new award activity and slowdown in road construction and Jal Jeevan Mission (JJM) projects have also hampered demand for the earthmover segment, which constitutes a bulk of the Indian MCE sector demand, Goswami added.

In Q1 FY2026, the growth of 31 per cent in exports was led by backhoe loaders, excavators and skid steer loaders, which cumulatively accounted for 76 per cent of the total exported volumes and saw a 34 per cent YoY growth, the report added.

The United States is one of the top two MCE markets globally and ranks among the top five export destinations for India-manufactured MCEs and related components.

The government has allocated Rs. 11.2 lakh crore for capital expenditure in FY2025-26, with major initiatives such as the JJM, PM Gram Sadak Yojna (PMGSY), and PM Awas Yojna-Gramin (PMAYG) receiving renewed focus, which will accelerate activities in upcoming quarters, the report said.