Advantage India
Robust
Demand
*The Indian electrical equipment market is set to experience significant growth in the coming years, with a forecasted incremental growth of Rs. 6,44,533 crore (US$ 76.24 billion) at a compound annual growth rate (CAGR) of 14.3% from FY24 to FY28.
*Market size for the Indian Construction Equipment Market stood at US$ 7.2 billion in FY23 and is forecasted to grow at a CAGR of 15% for next 5 years, as per the estimates of CII.
Attractive
Opportunities
*In the Union Budget FY26, the government announced capex of Rs. 11,21,000 crore (US$ 128.42 billion) (3.1% of GDP).
*Ministry of Road Transport & Highways aims for 13,814 km of national highway construction in FY 2024 and a network to 2 lakh km by 2025.
*An Urban Infrastructure Development Fund (UIDF) will be managed by National Housing Bank, which will enable creation of infrastructure in Tier 2 and 3 cities by supporting viability gap funding, enabling creation of more bankable projects, enhancing access to external funding, among others
Policy
Support
*De-licensed engineering sector; 100% FDI permitted.
*Ministry of Heavy Industries has notified the Scheme on Enhancement of Competitiveness in the Indian Capital Goods Sector- Phase-II for providing assistance to Common Technology Development and Services Infrastructure. The scheme has a financial outlay of Rs. 1207 crores (US$ 145.1 million) with budgetary support of Rs. 975 crore (US$ 117.2 miilion) and industry contribution of Rs.232 crore (US$ 27.9 million)
*Indian Electrical Equipment Industry Mission Plan (2012-22), aims to make India as a preferred destination for production of electrical equipment to achieve an output of US$ 100 billion by balancing the trade deficit in the sector.
*In October 2022, NSIC Signs MoU with Phillips Machine Tools India Pvt. Ltd. for Skill Development Training in Additive Technologies which is the future of manufacturing.
Higher
Investments
*To enhance opportunities for private investment in infrastructure - Infrastructure Finance Secretariat is being established who will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power.
*The Government’s ‘Vision Plan 2030’ proposed an action plan to become a manufacturing and export hub for construction equipment and propel the development of world-class infrastructure in the country.
Introduction
India’s Capital Goods manufacturing industry serves as a strong base for its engagement across sectors such as Engineering, Construction, Infrastructure and Consumer goods, amongst others.
The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Demand for engineering sector services is being driven by capacity expansion in industries like infrastructure, electricity, mining, oil and gas, refinery, steel, automobiles, and consumer durables. India has a competitive advantage in terms of manufacturing costs, market knowledge, technology, and innovation in various engineering sub-sectors. India’s engineering sector has witnessed remarkable growth over the last few years, driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of huge strategic importance to India’s economy.
The development of the engineering sector of the economy is also significantly aided by the policies and initiatives of the Indian government.
The engineering industry has been de-licensed and allows 100% Foreign Direct Investment (FDI). Additionally, it has grown to be the biggest contributor to the nation's overall merchandise exports.
India became a permanent member of the Washington Accord (WA) in June 2014. it is now part of an exclusive group of 17 countries that are permanent signatories of the WA, an elite international agreement on engineering studies and the mobility of engineers.
Market Size
In FY25, exports of engineering goods reached at Rs. 9,86,328 crore (US$ 116.67 billion).
The top 5 export destinations for engineering goods during FY25 were USA, UAE, Saudi Arabia, Germany and Italy.
Imports of Electrical Machinery in India increased to US$ 12.30 billion in FY24. The Indian electrical equipment industry comprises of two broad segments, Generation equipment (boilers, turbines, generators) and Transmission & Distribution (T&D) and allied equipment like transformers, cables, transmission lines, etc. The sector contributes about 8% to the manufacturing sector in terms of value, and 1.5% to overall GDP. Incentives for capacity addition in power generation will further increase the demand for electrical machinery.
Capital Goods sector contributes 1.9% to overall India’s GDP.
The Quick Estimates of IIP in March 2025 stands at 164.8 against 160.0 in March 2024. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of April 2025 stand at 130.9, 144.6 and 212.0 respectively.
The heavy engineering and machine tools sector are a vital component of the capital goods industry. Currently, India's capital goods sector is receiving considerable focus due to its essential contribution to industrial growth and economic development. Notably, the production within this sector has surged from Rs. 2,29,533 crore (US$ 27.2 billion) in CY15 to Rs. 4,29,001 crore (US$ 50.7 billion) in CY24.
The market size of the Plastic machinery sector stood at US$ 0.5 billion.
Indian Process Plant and Machinery (PPM) industry has estimated capacity of US$ 6.00 Billion per annum
Earthmoving equipment sales grew by 23% YoY in second quarter of FY24, as the total equipment numbers sold increased to 22,334.
Foundry industry has a turnover of approx. US$ 20 billion with exports of approx. US$ 3.54 billion.
There are 750–800 domestic Medical Devices manufacturers in India, with an average investment of US$ 2.3–2.7 million and an average turnover of US$ 6.2-6.9 million.
The Indian industrial fasteners market was valued at US$ 9,064 million in 2022 and is projected to reach US$ 17,868 million by 2030, registering a CAGR of 7.9% during the forecast period (2023-2030).
India steam boiler systems market size is expected to reach nearly US$ 22.56 billion by 2027 with the CAGR of 4.63% during the forecast period.
The India generator sets market is expected to grow at a CAGR of more than 5% over the period of 2020-2025.
The India power transformer market is expected to rise at a CAGR of more than 3% during the forecast period of 2020-25.
India switchgear market size was estimated at US$ 9.75 million in 2022 and is expected to grow at CAGR of 7.12% reaching a value of US$ 18.23 million by 2029.
India’s automotive industry is worth more than US$ 222 billion, contributes 8% of the country’s total export, accounts for 7.1% of India's GDP and is set to become the 3rd largest in the world by 2030.
Indian auto components industry, which accounts for 2.3% of India’s GDP currently, is set to become the 3rd largest globally by 2025. According to the Automotive Component Manufacturers Association of India, the auto-components industry of India is expected to grow by 10-15% in FY24, which would be driven by both domestic and export market demand.
The Indian agricultural equipment market has reached a value US$ 10.25 billion in 2023 and is anticipated to grow at a CAGR of 5.24% through 2029.
The Indian machine tool market size reached US$ 1.5 billion in 2023 and is expected to reach US$ 3.2 billion by 2032, exhibiting a growth rate (CAGR) of 8.2% during 2024-32.
In FY23, India’s heavy electrical equipment production stood at Rs. 2,44,300 crore (US$ 29.38 billion).
The boiler market in India is expected to grow from Rs. 5,859 crore (US$ 704.6 million) in FY19 to Rs. 8,831 crore (US$ 1.1 billion) in FY30 with an expected CAGR of 3.8%.
In FY24, exports of engineering goods stood at US$ 109.32 billion, reflecting a marginal growth of 2.1% of YoY growth. In April 2024, exports of engineering goods reached at US$ 8.67 billion.
Investments
Engineering accounts for about 25% of India’s total global exports in the goods sector and is one of the largest foreign exchange earners.
As per the budget estimates (BE) of FY26, the production-linked incentive (PLI) scheme for the automobile and auto components sector got a massive boost at Rs 2,818.85 crore (US$ 322.90 million) in FY26.
The engineering industry in Maharashtra reported exports worth US$ 22.99 billion in FY24 contributing around 21.0% of India’s engineering exports.
- In October 2023, the Automotive Research Association of India (ARAI) signed an agreement with IIT Guwahati to set up a common engineering facility centre titled ‘Digital Twin Centre for Emerging Automotive Systems’ in a hub and spoke model.
- In July 2023, Bharat Heavy Electricals Limited (BHEL) signed a Technical Assistance and License Agreement with General Electric Technology GmbH Switzerland for Gas Turbines.
- Creation of a significant number of special economic zones (SEZs) across the country has been approved.
- The development of Delhi Mumbai Industrial Corridor (DMIC) across seven states will further bolster the engineering sector.
- Reliance Defence and Engineering Ltd has signed an agreement with the US Navy for undertaking service, maintenance, and repair of Seventh Fleet of US Navy at the Reliance Shipyard at Pipavav in Gujarat.
- American plane maker Boeing Corporation has launched the Boeing India Engineering & Technology Centre in Bengaluru.
- In November 2022, L&T Infotech and Mindtree merged to make India's 5th-largest IT company, LTIMindtree, that will help businesses proactively take on and shape the future by harnessing the full power of digital technologies.
- In January 2023, Bharat Heavy Electricals Ltd (BHEL) bagged the order for renovation and modernization of 200 MW Unit-3 and 210 MW Unit-5 steam turbines at Ukai thermal power station in Gujarat.
- In January 2023, L&T Technology Services Limited announced to acquire the Smart World & Communication (SWC) Business of L&T, to combine synergies and take offerings in Next-Gen Communications, Sustainable Spaces and Cybersecurity to the global market.
In the recent past, there have been many major investments and developments in the Indian engineering and design sector:
- The Indian construction equipment (CE) industry, which aspires to become the world's second-largest by 2030, turned in its best-ever performance with 26% year-on-year growth in FY23 as sales crossed the one lakh unit mark driving on road construction and railway demand.
- The IMARC Group expects the machine tools market to reach US$ 2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28.
- The Indian government announced a reduction in customs duty on textile machinery, spares, and accessories. The changes include bringing shuttleless looms under the category of zero rate of duty.
- India’s telecom equipment exports reached US$ 7.28 billion in 2023-24 (until September 2023).
- In June 2024, PV sales decline by 2.88% MoM to 3.37 lakh units, as against 3.47 lakh units.
- The total EV sales reached 1.67 million in 2024, up from 1.18 million in 2023.
- Export of the total number of automobiles stood at 4.5 million in FY24.
- The exports of passenger vehicles increased from 6.6 million units in FY23 to 6.7 million units in FY24.
- In February 2023, Reliance Industries Limited (RIL) and its vehicle partner Ashok Leyland unveiled India’s first Hydrogen Internal Combustion Engine (H2-ICE) technology solution for heavy-duty trucks at the India Energy Week in Bengaluru.
- State-run PSUs Nuclear Power Corporation of India Ltd (NPCIL) and Bharat Heavy Electricals Ltd (BHEL) have signed a memorandum of understanding (MoU) in April 2023 to jointly pursue business opportunities in the area of Nuclear Power Plants based on Pressurized Heavy Water Reactor (PHWR) technology.
- The Ministry of Heavy Industries, in March 2023, sanctioned Rs. 800 crore (US$ 97.3 million) under FAME India Scheme Phase-II to three PSU oil marketing companies (OMC) for setting up 7,432 public fast charging EV stations across the country.
- In October 2022, exports of engineering goods from India stood at US$ 7.4 billion.
- In October 2022, the total production of passenger vehicles, three wheelers, two wheelers, and quadricycles was 2,191,090 units.
- In FY21, production of boilers stood at Rs. 6,728.36 crore (US$ 842.35 million).
- Exports of auto components stood at Rs. 1.41 lakh crore (US$ 19 billion) in FY22.
- With 100% FDI allowed through the automatic route, major international players such as Cummins, GE, ABB, and Alfa Laval have entered the Indian engineering sector due to growth opportunities.
- In February 2022, Microsoft India, and Larsen & Toubro (L&T) signed a Memorandum of Understanding (MoU) to build a regulated sector cloud product. The two businesses will collaborate with a select group of significant customers in regulated industries to design architectures and roadmaps to help them achieve their digital transformation goals and transition traditional datacentres to hybrid cloud architecture.
Government Initiatives
The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100% FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles.
- MHI is implementing the Scheme for ‘Enhancement of Competitiveness in the Indian Capital Goods Sector Phase 2’ in order to facilitate adoption of Industry 4.0 and to promote investments in manufacturing sector, indigenization of technologies and creation / augmentation of common service infrastructure / Testing facilities. Rs. 250 crores have been allocated under this Scheme for Financial Year 2023-24.
- The Ministry of Heavy Industries (MHI) launched two Production Linked Incentive (PLI) Schemes, namely PLI Scheme for Automobile and Auto Component Industry, and PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage.
- To increase the employability of engineering graduates in the country, AICTE (All India council of technical education) leadership is taking a lot of efforts and recommends model curriculum for engineering programs like AI, IoT, Robotics, Block chain, Machine learning, Data Science and Cyber security.
- In October 2022, NSIC Signs MoU with Phillips Machine Tools India Pvt. Ltd. for Skill Development Training in Additive Technologies which is the future of manufacturing.
- In June 2022: Ministry of Heavy Industries (MHI) and Ministry of Skill Development and Entrepreneurship (MSDE) sign MoU to facilitate training in engineering trades to boost capital goods sector. In May 2022, MHI signs an MoU with National Research Development Corporation to facilitate various activities for smooth implementation of the Scheme for Enhancement of Competitiveness in the Indian Capital Goods Sector.
- In the Union Budget FY26, the government announced capex of Rs. 11,21,000 crore (US$ 128.42 billion) (3.1% of GDP).
- The Indian electrical equipment market is set to experience significant growth in the coming years, with a forecasted incremental growth of Rs. 6,44,533 crore (US$ 76.24 billion) at a compound annual growth rate (CAGR) of 14.3% from FY24 to FY28.
- India has constructed 5,614 kms oh highways in FY25 comprising expressways, national, state highways, district and village roads.
- The automobile component industry turnover stood at Rs. 3.3 lakh crore (US$ 39.6 billion) during first half of FY25, registering a revenue growth of 11.3% as compared to first half of FY24.
- In November 2022, Engineering Export Promotion Council of India (EEPC) stated that the government’s decision to withdraw the 15% export duty imposed on iron ore and steel products would boost engineering goods exports from the country.
- The All-India Council for Technical Education (AICTE) has launched educational books for diploma and under-graduate engineering courses in Marathi language so that students can learn better in their native language.
- The AICTE has entered into collaborations with the MSME ministry, NHAI and DM offices in 150 districts to facilitate engineering internships for students.
- Prime Minister Mr. Narendra Modi, on the country's 75th Independence Day, announced plans to invest Rs. 100 trillion (US$ 1.35 trillion) in infrastructure to stimulate economic development and generate employment.
Road Ahead
The electrical equipment market share in India is expected to increase by US$ 33.74 billion from 2021 to 2025, and the market's growth momentum will accelerate at a CAGR of 9%.
Investment in engineering R&D sector is expected to reach US$ 63 billion by 2025.
The India Construction Equipment Market size is estimated at Rs. 69,046 crore (US$ 7.91 billion) in 2025 and is expected to reach Rs. 1,02,827 crore (US$ 11.78 billion) by 2030, at a CAGR of 8.3% during the forecast period (2025-2030).
The construction equipment industry is expected to sell 165,097 units by 2028.
The machine tools market is expected to reach US$ 2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28.
India’s expected export of medical devices will reach ~ US$ 10 billion by 2025.
India steam boiler systems market size is expected to reach nearly US$ 22.56 billion by
2027 with the CAGR of 4.63% during the forecast period.
The India generator sets market is expected to grow at a CAGR of more than 5% over the period of 2020-25.
The India power transformer market generated a revenue of Rs. 16,063 crore (US$ 1.9 billion) in FY22 and is expected to reach Rs. 28,744 crore (US$ 3.4 billion) by FY30.
Automobile retail sales in FY25 grew 6.46% over the previous year with passenger vehicles (PV) growing by 4.87%, two-wheelers (2W) retail sales rising 7.71% and commercial vehicles (CV) de-growing by 0.17%, according to data released by Federation of Automobile Dealers (FADA).
The total EV sales reached 20 lakh in FY25, 50% of the sales is contributed by E2W.
Export of the total number of automobiles stood at 5.3 million, growth of 19% YoY in FY25.
Passenger vehicle exports rose by 15% to 7,70,364 units, marking the segment’s best-ever performance, supported by the demand for global models manufactured in India.
Passenger vehicle sales in India reached an all-time high of 4.3 million units in the financial year FY25, according to data released by the Society of Indian Automobile Manufacturers (SIAM).
India will become a major exporter of telecom equipment in the next two to three years and the government is working to achieve that goal.
India’s engineering R&D market will increase from US$ 36 billion in FY19 to US$ 63 billion by FY25. The export of engineering goods is expected to reach US$ 200 billion by 2030.
India’s earthmoving and construction equipment (ECE) industry has enjoyed strong growth over the last seven years due to rapid economic development, and it has become the third largest construction equipment market in the world. Construction Equipment sales grew by 26% YoY to 135,650 units in FY24. With development of infrastructure, demand for construction equipment and other machinery is expected to rise significantly.
The material handling equipment sector is expected to gain from robust demand from steel, power, mineral and other infrastructure industries, while demand for machine tools from the capital goods sector (especially automobile and textile industries) is projected to remain high.
The ‘Make in India’ initiative and the government's focus on ease of doing business is likely to present several opportunities in the engineering and capital goods sector in the upcoming years.
Note: Passenger Vehicles data excludes BMW, Mercedes, Tata Motors & Volvo Auto
References: Media reports, press releases, EEPC India, Press Information Bureau (PIB), Department for Promotion of Industry and Internal Trade (DPIIT), The Confederation of Indian Industry (CII), Indian Electrical & Electronics Manufacturers’ Association (IEEMA), Union Budget 2023-24, Union Budget 2025-26
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