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April, 2011

India has clearly emerged as an information technology (IT) as well as a research and development (R&D) hub for many international firms with its vast availability of talented and skilled manpower. India's research and development capability spans around a wide spectrum of industries. Technological and systematic innovation plays a leading role in motivating fast economic and productivity growth.

Significantly, Indian firms are making inroads into the global science and technology sector. The Union Budget 2010-11 has also defined a National Clean Energy Fund for funding research and innovative projects in clean energy technologies to be established.

The country has put training and education as a priority and according to an industry chamber study, the size of the education sector is expected to double to US$ 50 billion by 2015.

India is emerging as an eminent design and engineering destination with numerous firms establishing their centres besides offshoring design tasks to India. According to a study conducted by National Association of Software and Service Companies (NASSCOM) and Booz & Company (a strategy and technology consulting firm), India has the potential to capture US$ 40-45 billion in engineering R&D services by 2020.

Furthermore, the Indian semiconductor industry is on a growth path driven by an upsurge in domestic sales.
 
Design and Engineering  

Design services

As India emerges as a global design hub, multinational companies (MNCs) are increasingly outsourcing industrial and engineering design tasks in diverse industrial sectors like semi-conductors, aerospace, automotive, farming equipment, power generation and consumer electronics among others.

Recently, Tata Motors’ small car Nano has received the good design award for 2010, from the Chicago Athenaeum: Museum of Architecture and Design with the European Centre for Architecture Art Design and Urban Studies.

Wipro Lighting won the coveted ‘Design for Asia Merit Recognition Award 2010’ in Product Design category for the most influential good design in Asia. The award was won for Wipro’s designer LED streetlight, Orio.

Among the major firms focussing on research and allied sectors,

  • Kone, the Finnish elevator and escalator company, has set up the Indian Technology and Engineering Centre to house its research and development (R&D) and engineering units under one roof in Chennai.
  • California-based device software optimisation (DSO) provider Wind River Systems, a wholly-owned subsidiary of Intel Corporation, plans to set up a research and development (R&D) centre in India to focus on innovation to its product line. According to Damian Artt, senior vice-president (worldwide sales and services, Wind River Systems said, "The country's industrial output rose 16.7 per cent in January 2010 from a year earlier, stronger than the market expectations, and India stands tenth in global spend with $24 billion in FY09. It is a critical market for Wind River."
  • Indus Institute of Technology and Engineering (IITE) has collaborated with Georgian College, Canada, to provide a unique Advanced Diploma in Mechanical Engineering Technology—Automotive Manufacturing for Indian students.

Automobile Design

Indian automobile companies have come of age and can today boast of several indigenously designed cars. Tata Motors has designed and developed its small cars, Nano and Indica, in India.

Propped by the increase in its car sales after the launch of General Motors' (GM) new model Beat, along with the robust growth in the Indian automobile sector, Kevin E Wale, President and Managing Director, General Motors China Group stated that India should be among the top ten markets for the company globally by 2011.

Tata Motors plans to build new Jaguar Land Rover engines in-house, combining the expertise of the group's engineers in India and the UK.

India has now established itself as a 'brand in engineering' with global original equipment manufacturers (OEMs) looking at India as a good outsourcing hub.

  • Rolls-Royce Group plc, the global power systems company, and Tata Consultancy Services (TCS), an IT services, business solutions and outsourcing firm, have announced a global engineering services partnership. As part of the agreement, TCS will support and enable Rolls-Royce strategy to expand its engineering services footprint in India.
  • Pune-based Automotive Research Association of India (ARAI) and DSM of the Netherlands have entered into an alliance to develop new lighter materials that could substitute metals in the automotive industry, and help auto components shed weight.
  • RSB Transmissions (I) Ltd, engaged in manufacturing of automotive, construction and farm equipment, has acquired, through its Netherland-based arm RSB Europe BV, 70 per cent stake in the Belgium-based construction equipment aggregate manufacturer Mechanical Supplies International NV (MSI).

Austria-based Miba Group has entered into a joint venture (JV) with the Pune-based clutch components manufacturer Maxtech Sintered Product Pvt Ltd. The JV would provide Indian and international car manufacturers and suppliers with high-tech sintered components.

Aviation Design

With a blend of its state-of-art information and aerospace technologies, India has tremendous potential in the area of design in aerospace. Engineering and design services being outsourced to India include control system design, embedded development, high level aeronautical system design, simulation, testing devices, cockpit equipment support software, air traffic management systems, and composite structuring.

  • Global aviation companies, such as Boeing and Airbus, are trying to increase their footprint by sourcing more components from India. As per Ian Thomas, President, Boeing India, said, "We are looking at partnerships with various Indian companies for different aircraft components." In the next 3-5 years, the infrastructure sector is looking at investments of more than US$ 500 billion.
  • A PriceWaterhouseCoopers (PwC) report on aerospace and defence cites auto part makers planning to enter aircraft component production, particularly in precision engineering, machining, aircraft lighting, tyre manufacture and transmission components. The south is gearing up for a stellar role in the space.
  • American aviation giant, Boeing has set up its research and technology centre at Bengaluru, which will work in the areas such as aero structures and aerodynamics to sustain the company's competitive technological edge.
  • According to Anand Mahindra, Vice Chairman and Managing Director, Mahindra & Mahindra (M&M), the firm plans to invest US$ 53.95 million to build a plant to manufacture aircraft components. Meanwhile, Mahindra Aerospace plans to become the first Indian private firm to manufacture smaller civil aircraft for the Indian general aviation market.

Semiconductor design

According to the India Semiconductor Association (ISA), sustained by demand from the telecom and IT sector, the semiconductor market in India is poised to grow at a CAGR of 22.1 per cent to touch US$ 8.04 billion in 2011.

Furthermore, as per ISA-Frost & Sullivan, India Semiconductor Market 2009-2011 reported, the Indian semiconductor market grew 15.6 per cent in 2009. "The opportunity in the semiconductor industry is expected to witness a CAGR of 34.8 per cent in the Total Available Market (TAM), the revenue of which is anticipated to climb to US$ 4.84 billion in 2011 from US$ 2.66 billion in 2009," as per the study.

India's microchip market is set for a robust compounded annual growth rate (CAGR) of 22.1 per cent, according to a report released by the India Semiconductor Association (ISA). The study said that wireless handsets, notebooks, set-top boxes, smart cards and newer technologies like 3G and WiMax are powering demand that feeds this growth.

As per Biswadip Mitra, Chairman, ISA, "The total available market for the Indian electronics industry is anticipated to rise significantly to US$ 37.1 billion in 2011 from US$ 25.4 billion in 2009."

Engineering services

The engineering sector is the largest segment of the overall Indian industrial sector. The engineering industry accounts for 12 per cent of India's GDP.

EEPC India, apex body of engineering exporters, has started off a series of 22 Buyer-Seller Meets (BSMs) across seven locations, including New Delhi, Kolkata, Chennai, Mumbai, Bangalore, Ludhiana and Ahmedabad in March 2010. In the first BSM series, nearly 100 Indian companies in the engineering sector had direct business talks with their counterparts from USA, Canada, Europe and CIS countries. Besides, 30 buyers from USA, Canada, Turkey, France, Slovenia, Spain, Bulgaria, Spain, Armenia and Ukraine etc attended the meet.

India enjoys a cost-advantage in casting and forging, as manufacturing costs in India are 25-30 per cent lower than western countries.

Mentor Graphics Corporation has partnered with Wipro Technologies to continue to enable time-to-market and first-time right solutions to their global product engineering customers.

QuEST Global, a global engineering services provider, has extended its master agreement with Rolls-Royce till 2015. QuEST Global will support the engineering resources of Rolls-Royce across its business divisions through an engineering centre located in Bangalore, India.

Eurocopter has inaugurated its Indian subsidiary which has been given the goal of expanding its commercial presence in the country, reinforcing its support and service network and developing the company's relations with the domestic industry. Eurocopter, which already has a facility in Bangalore for the management of industrial activity, plans to have an engineering centre in the city by next year apart from a commercial office in Mumbai.

US-based Identity management software provider, SailPoint has set up an engineering and support centre in Pune at an investment of US$ 9,92,172. The centre will team with SailPoint's US-based engineering team to deliver next-generation identity management.

Engineering Services Outsourcing (ESO) Engineering Services Outsourcing (ESO)

The Engineering Services Outsourcing (ESO) sector is another sector with great potential. ESO includes product design, research and development and other technical services across sectors like automotive, aerospace, hi-tech/telecom, utilities and construction/industrial machinery.

According to a study by NASSCOM and Booz Allen Hamilton (a strategy and technology consulting firm), the global engineering services market in 2020 is estimated to touch US$ 1,100 billion, of which the outsourced component is estimated to reach around US$ 200 billion. As per the report, India may capture around 25 per cent of the global ESO pie, worth around US$ 40 billion by 2020. At present the ESO market is around US$ 15 billion, with India enjoying 12 per cent share. The engineering services landscape in India has evolved significantly over the last four years, reflecting maturity, diversification and enhanced verticalisation to partner with global corporations, as per the study.

Chennai is fast emerging a hub in engineering design, R&D and product development for a number of global players. Companies across sectors- automobile, telecom, infrastructure, wind energy have set up their centres in the city encouraged by the good eco-system, talent pool and growing number of original equipment manufacturers (OEMs).

Government Initiatives

Indian service providers have invested considerably in increasing their global footprint to provide services to geographically distributed customers. They have established sales teams in North America and Europe and delivery centres in China and Japan for closer interaction with customers in the former and to co-ordinate efforts with existing manufacturing facilities in the latter. Within India, companies have begun to move to tier-2 cities to take advantage of lower costs of operations and to access a large graduating pool of engineers.

The miscellaneous mechanical and engineering industries sector-wise foreign direct investments (FDI) inflows from April 2000 to January 2010 was calculated at US$ 891.49 million, as per the Department of Industrial Policy and Promotion (DIPP).

The Government has announced a series of policy initiatives and programmes - a special incentive package for investments in manufacturing, setting up a National Electronics Mission and an Electronics Development Fund - in the field of information and communication technology (ICT).