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Indian engineering industry

June, 2013

Brief Introduction

The engineering sector is one of the largest sectors among the industrial segments in India. Majorly comprising heavy and light engineering segments, this industry is closely linked with the manufacturing segments of the economy.

The Indian engineering industry accounts for 27 per cent of the total factories in industrial sector and represents 63 per cent of the overall foreign collaborations. Asia’s third largest economy is globally acknowledged for its low-cost, high-tech frugal innovation technology, according to a World Bank study named ‘Unleashing India’s Innovations’. Foreign companies are not at all hesitant in outsourcing industrial engineering design tasks to Indian firms in sectors like semiconductors, automotive hybrid technologies, next-gen routers in telecom, power generation equipments, aerospace, avionics and consumer electronics, besides setting up research and development (R&D) centres in the country.

Moreover, India is one of the leading offshore destinations in delivering engineering research and development (ER&D) services with a market share of 22 per cent. The ER&D market in India is projected to grow to US$ 42 billion by 2020, according to a study titled 'Engineering R&D: Advantage India' by Zinnov.


The engineering sector is one of the major contributors to the country's total merchandise shipments. The US and Europe together account for over 60 per cent of India's total engineering exports.

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

The Ministry of Commerce and Industries has set a target of shipping US$ 125 billion worth of engineering goods by the end of 2013-14. Indian engineering companies are scouting for newer markets (like Latin America, Africa etc.) for exports along with strengthening their base in the US and Europe.

During April-February 2012-2013, exports from the sector stood at US$ 51 billion.

Design & Engineering- Key Developments and Investments

The miscellaneous mechanical and engineering industries’ sector-wise foreign direct investments (FDI) inflows from April 2000 to March 2013 was calculated at US$ 2.32 billion, as per the Department of Industrial Policy and Promotion (DIPP).

  • Capvent AG, a Swiss private equity (PE) fund company has bought a majority stake of 51 per cent in Morf India, a Chennai-based water engineering company which has operations across South India. The capital is said to be deployed to develop new and innovative products, brand campaigns and expansion plans. The company has also drafted a multi-tier business network, comprising distributors, channel partners and lead generators to reach out to its customers.
  • Engineering services company Tata Technologies has acquired US-headquartered Cambric Corporation for US$ 32.5 million in order to boost its revenues from the European continent. The deal will give Tata access to three development centres in Romania while the company is to benefit from Cambric’s existing clientele in the construction and heavy equipment space, including marquee names such as Caterpillar and CNH. Cambric’s existing customers will also have the option of being serviced by the Tata group company centres in India.
    Cambric is a service provider for system engineering and design capabilities in engine, power train, chassis and structures, electrical and hydraulic systems.
  • The public sector power equipment major BHEL had recently signed a deal with Mitsubishi according to which the Japanese company will render the former the technology for removing the harmful sulphurous compounds from the gases that escape out of thermal power plants.
    BHEL hopes to earn Rs 1,500 crore (US$ 251.77 million) of additional business, arising out of this recently-signed technology tie-up with Mitsubishi Heavy Industries.
  • Indian Space Research Organisation (ISRO) is planning to launch India’s first navigation satellite - Indian Regional Navigation Satellite System-1A (IRNSS-1A) - on July 1, 2013 from Satish Dhawan Space Centre, Sriharikota.
    The 1,425 kg-equipment, IRNSS-1A will have a life span of about 10 years and will provide satellite-based terrestrial, aerial and marine navigation services and also help in disaster and fleet management and vehicle tracking, as per an ISRO statement.
    ISRO also intends to have a constellation of seven satellites under IRNSS by 2014-15.

Government Initiatives

Dr Manmohan Singh, the Prime Minister of India, has revealed the country's new Science, Technology and Innovation policy which aims to increase the number of full time equivalent of R&D personnel in India by at least 66 per cent of the present strength in five years.

Alongside, the National Policy on Electronics (NPE) proposes to set up more than 200 Electronic Manufacturing Clusters in India while the Government of India (GoI) has proposed to create an electronics development fund of US$ 2 billion to promote innovation, intellectual property, R&D, nano electronics and help commercialise made-in-India products. The chip design and embedded software market in India is estimated to reach US$ 55 billion by 2020, as per the targets set by NPE.

In addition to that, the Government plans to give an impetus to engineering in India through investments in infrastructure development in 2012-17 in telecom, energy and construction sector, as per a report by Nasscom and Booz & Co.

Road Ahead

India produces over 200,000 engineers every year and has a strong pool of scientists and engineers, vast institutional network, and cost effective manufacturing

Domestic and international companies have increased their stakes in R&D in sectors like Information, Communication and Technology (ICT), automobiles and auto components, industrial engineering, electronics and pharmaceuticals. India is also witnessing R&D growth in areas such as genetic modification, bio-energy sources, biochemistry, atomic energy, organ donation and biomedical science. Indian design houses are playing a crucial role in the development of new automobiles seeing potential markets overseas.

Meanwhile, Indian offshore ER&D services market is expected to reach US$ 37-45 billion and create over one million jobs by 2020, according to an industry report by Nasscom and Booz & Co. This will be about 35 per cent of the overall ER&D market, which is estimated to touch US$ 118 billion by 2020, while being currently pegged at US$ 10.2 billion.

Exchange Rate Used: INR 1 = US$ 0.01678 as on June 20, 2013

References: Press Releases, Media Reports, Department of Industrial Policy and Promotion (DIPP) statistics, Ministry of external Affairs website, CCI report