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June, 2011

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)

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).

Exchange rate used: 1 USD = 44.62 INR (as on June 2011)

References: NASSCOM and Booz Allen Hamilton Study, Department of Industrial Policy and Promotion (DIPP) Data, Press Releases, Media Reports