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Engineering

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Engineering

December, 2011

Brief Introduction

The Engineering sector is diverse, comprising a number of segments. However, it can be broadly categorised into two segments- heavy engineering and light engineering. The Indian engineering industry is relatively less fragmented at the higher-end, as the competencies needed are intense, while it is highly scattered at the lower levels and is dominated by smaller players.

Along with basic engineering industry, engineering services outsourcing (ESO) and designing have also developed exponentially over the last few years in India. Moreover, India is ranked first in the field of Engineering Research and Development and Design (ER&D) outsourcing industry with a 22 per cent share in the revenue globally.

Some of the recent developments that took place in Indian engineering and design industry are discussed hereafter.

Exports

Engineering exports include transport equipment, capital goods, other machinery/equipment and light engineering products like castings, forgings and fasteners.

Going by the data compiled by the Engineering Export Promotion Council (EEPC), the apex body of engineering exporters, engineering consignments for the month of September 2011 stood at US$ 7.1 billion. By far in 2010-11, engineering goods have been the largest contributor (with US$ 60 billion worth of consignments) to the total Indian exports of US$ 245.9 billion. Engineering exports for the period April-August 2011 had increased by 125 per cent, aggregating to US$ 40 billion.

Design & Engineering- Key Developments

  • Bearings maker SKF India is planning for a capacity expansion at its manufacturing unit in Ahmedabad. The unit would majorly cater to sectors like renewable energy, construction and railways.

Also the company, with 27 per cent market share in organised bearings manufacturing sector in India, has recently inaugurated its global technical centre in Bengaluru. The facility plans to hire 400 engineers by 2015 and entail an investment of Rs 50 crore (US$ 9.52 million) for its development.

  • Pune is increasingly emerging as Asia's innovation hub. The city boasts of 124 software product start-up companies, 112 top global research and development (R&D) centres, 24, 000 talented people dealing with various projects, 17 special economic zones (SEZs) and information technology (IT) parks, 18 IT-business process outsourcing (BPO) SEZs and over 40 engineering colleges.

Pune nurtures over 12, 000 engineering graduates every year and the number is further expected to swell as more colleges are coming up. Automotive engineering and enterprise software product engineering are key areas of strength within the entire industry ecosystem for Pune.

  • The Indian unit of Germany's Siemens AG - Siemens Ltd, will venture into engineering, procurement and construction (EPC) solutions business for solar photovoltaic plants in India. The company recognises India as one of the fastest growing renewable energy markets globally and hence, aims to tap the opportunity.

Design & Engineering- Major Investments

  • The miscellaneous mechanical and engineering industries' sector-wise foreign direct investments (FDI) inflows from April 2000 to September 2011 was calculated at US$ 2, 134.21 million, as per the Department of Industrial Policy and Promotion (DIPP).
  • The hydraulics business of Wipro and Kawasaki Heavy Industries - Wipro Infrastructure Engineering – will entail an outlay of Rs 50 crore (US$ 9.52 million) to set up a facility in Bengaluru that would manufacture hydraulic pumps for excavators. The joint venture (JV), namely Wipro Kawasaki Precision Machinery, will have a start-up capacity of 4, 000 pumps which would be expanded to 15, 000 pumps by 2015.

The Indian Forging Industry

The Indian Forging industry is mushrooming as a major contributor to the manufacturing sector of the Indian economy. Forging industry is a basic industry and involves the process by which metal is heated and is given a particular shape through plastic deformation by applying a compressive force. Usually the compressive force is in the form of hammer blows using a power hammer or a press.

Growth of such basic industries is directly proportional to a country's GDP growth. And since India's GDP is fairly estimated to grow in the coming years, forging industry is also anticipated to grow accordingly. In the light of this fact, the Association of Indian Forging Industry (AIFI) has projected that the Indian forging industry is set to enhance by over 20 per cent per annum and attract investments of about US$ 3 billion by 2015 for capacity expansion.

As of now, the Rs 15, 000 crore (US$ 2.85 billion)-industry gets 70 per cent of its business from automotive sector. Moreover, Deven Joshi, President, AIFI, has revealed that the overall production of forgings increased from 1.8 million tonnes in 2009-2010 to 2.3 million tonnes during the year ended March 31, 2011, registering a growth rate of more than 28 per cent. This is predicted to grow further to 4 million tonnes by 2014.

Government Initiatives

Road Ahead

Indian ER&D service industry has been quite instrumental in establishing India as a design and innovation hub by speeding-up innovation and application. Experts believe that this kind of exponential growth will make India one of the major global players with better domain capabilities and establish the country as a pioneer in the ER&D space.

On the similar lines, NASSCOM anticipates that the market for ER&D services would increase by over four times to touch US$ 40-US$ 45 billion by 2020.

Exchange Rate Used: INR 1 = US$ 0.0190 as on December 17, 2011

References: Media Reports, Press Releases, Engineering Export Promotion Council publication, Department of Industrial Policy and Promotion statistics, Dun & Bradstreet India (D&B)