The construction equipment industry in India is projected to grow to $5 billion by 2019-20 from the current size of $2.8 billion, an industry report said on Wednesday.

According to a report from the Indian Construction Equipment Manufacturers' Association -- an affiliated body of the Confederation of Indian Industry -- the after sales spares market is about $800 million and is a major source of income and employment opportunity.

"There is cautious optimism that by 2018-19, the industry will get back to an output level of 70,000 units that was achieved in 2011-12. The overcapacity built in earlier boom years is expected to be utilised before fresh investments are made," it said.

According to the industry body, the recent progress in highway road building activity and coal mining auction augurs well with the futuristic projected growth.

"There is scope for the government to play an enabling role for the industry to grow. Clearing the GST and Land bills and creating a separate regulatory framework and legislation specifically for off-highway equipment are of utmost priority," it said.

While backhoe loaders and hydraulic excavators continue to dominate the market accounting for over half the size, customer practices to use better technology equipment is changing, albeit slowly. Presently, while direct employment in the sector is about 1 million, it impacts over 10 million livelihoods in allied sectors, the report said.