Last Updated: July 17, 2014
Updated: June, 2014
SECTORAL REPORT | April, 2014
Engineering is by far the largest segment in the Indian industry. It is a diverse industry with a number of segments, and can be broadly categorised into two segments, namely, heavy engineering and light engineering. Powered by significant investments in power projects and infrastructure development, the sector has witnessed tremendous growth in recent years. It employs approximately four million skilled and semi-skilled workers and accounts for 27 per cent of the total factories in the industrial sector.
The engineering sector is among the top contributors to the total Indian export basket. Engineering exports from the country include transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners. The sector accounts for about 20 per cent of India’s total exports and is the largest foreign exchange earner for the country in terms of merchandised goods. The Engineering Export Promotion Council (EEPC) is the apex body in charge of promotion of engineering goods, products and services from India.
Continued growth of manufacturing sector and favourable regulatory policies will further propel the sector’s growth. With 100 per cent foreign direct investment (FDI) allowed through the automatic route, major international players such as Cummins, ABB and Alfa Laval have entered the Indian engineering sector and have raised the industry’s competitiveness.
Engineering research & design (ER&D) revenues are projected to increase to US$ 45 billion in 2020 from US$ 11.2 billion in 2012. The turnover of engineering services firms is also likely to touch US$ 37 billion by 2020.
Engineering exports from the country stood at US$ 61.61 billion in 2013–14, registering a growth of 8.49 per cent compared to the previous year. During April 2014, the overseas sales of engineering products rose 21.3 per cent to US$ 5.7 billion.
Engineering exports to India’s Free Trade Agreement (FTA) partners such as South Korea, Japan, Sri Lanka and the Association of Southeast Asian Nations (ASEAN) bloc have witnessed robust growth. Shipments to South Korea rose by over 60 per cent and to Japan by 16 per cent during February 2014.
Of the country’s total engineering exports, the United States (US) and Europe account for over 60 per cent. Transport equipment is the leading contributor to engineering exports, accounting for 32.5 per cent of the total exports during FY 13.
The foreign direct investment (FDI) inflows in miscellaneous mechanical and engineering industries during April 2000 to March 2014 stood at US$ 2,606.83 million, as per data released by Department of Industrial Policy and Promotion (DIPP).
The following are some of the major investments and developments in the Indian design and engineering sector:
The Government of India has planned capacity additions of 120 gigawatt (GW) in the 12th Five-Year Plan. Governmental infrastructure projects such as Golden Quadrilateral and the North-South and East-West corridors fuelled growth in the engineering sector.
With an aim to give a boost to the manufacturing sector, the government in its interim budget 2014-15 has announced cut in excise duty, or factory gate tax, on capital goods, consumer durables and vehicles. It would also provide 15 per cent exemption on tax to manufacturing companies that invest more than US$ 18.4 million in plant and machinery over FY 15. Further, the National Manufacturing Policy has set the goal of increasing the share of manufacturing in gross domestic product (GDP) to 25 per cent and to create 100 million jobs over the next decade.
In addition to that, the government plans to give impetus to engineering in India through investments in infrastructure development in 2012–17 in telecom, energy and construction sector, as per a report by the National Association of Software and Services Companies (Nasscom) and Booz & Co.
India is fast moving from exporting low-value goods to developing countries to exporting high-value goods to developed countries. With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected to touch US$ 120 billion by 2015. “Engineering exports are likely to grow in India with the new government set to take bold decisions that will boost the sector,” as per EEPC.
India’s share of global engineering process outsourcing is expected to reach US$ 40 billion by 2020, which will be 30 per cent of the total global market. The Indian electrical machinery industry is likely to double its sales to US$ 100 billion between 2012 and 2022.
The industry can also look forward to deriving revenues from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things, becoming a reality. Wipro, HCL Technologies, Tata Consultancy Services (TCS), Tech Mahindra and Infosys are account for most of the R&D activities outsourced to India.
Exchange Rate Used: INR 1 = US$ 0.01685 as on June 03, 2014
References: Press Releases, Media Reports, Department of Industrial Policy and Promotion (DIPP) statistic, Engineering Export Promotion Council, The Union Budget 2014-15.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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