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June, 2012


Engineering industry forms the backbone of any economy as it is intensely linked with many other core sectors. Same is the case with the Indian engineering sector, whichis the largest segment of the Indian industry. Engineering goods account for 30.5 per cent of the share in index of industrial production (IIP), 29.9 per cent of share in total investment and 62.8 per cent of share in foreign collaborations. The sector is also the largest foreign exchange earner for the country.


Exports from the engineering sector form about one-fourth of India's total merchandise shipments. The US and Europe are major markets for India as they account for over 60 per cent of the country's total engineering exports. Engineering exports include transport equipment, capital goods, other machinery or 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 exports increased by 17 per cent to US$ 58.2 billion during 2011-12, as against US$ 49.7 billion in the previous fiscal. During April-June 2012-13, the sector's shipments grew by 94 per cent year-on-year (y-o-y) to US$ 23 billion.

The Ministry of Commerce has formulated a strategy paper targeting engineering exports at US$ 125 billion by 2013-14.

Key Developments and Investments

The miscellaneous mechanical and engineering industries' sector-wise foreign direct investments (FDI) inflows from April 2000 to April 2012 was calculated at US$ 2,232.13 million, as per the Department of Industrial Policy and Promotion (DIPP).

  • The Thumba Equatorial Rocket Launching Station has launched 'Vyom,' - the first sounding rocket designed and realised by B-tech students of Indian Institute of Space Science and Technology (lIST), Thiruvananthapuram. The main objective of the launch was to flight test the solid motor and the accelerometer payload developed for the project.
  • The Escorts Group is upgrading its engineering capabilities by undertaking overseas acquisitions in technology sector. It has recently partnered with Italian crane maker Locatelli. The company intends to enhance its equipment portfolio through this deal by locally manufacturing large skew cranes (having 360 degree rotation with 60-80 tonnes of capacity) which are used for material handling in large infrastructure projects such as power plants, metro and bridges. Production is likely to commence in 2013-14.
  • The Government of Karnataka has signed memoranda of understanding (MoUs) with over 47 investors to attract investments of about Rs 243.67 crore (US$ 42.63 million). The outlay would be spread over Dakshina Kannada and Udupi districts. Most of the deals signed entail projects like cashew processing units, ice-block making units, cold storage units and general engineering projects.
  • The world's leading open source solutions provider Red Hat has announced that it would set up its largest engineering facility outside North America in Pune. The company has also launched another 'Engineering Center of Excellence' in Bengaluru, re-affirming its commitment to the Asia-Pacific region.
  • Chinese equipment maker Huawei plans to strengthen its foothold in India. It will invest US$ 2 billion over 2012-16 to set up global research and development (R&D) centre in the country. Huawei also has a global service resource centre (GSRC) in Bengaluru along with a global network operations centre (GNOC), which is its largest such centre outside China. These centres cater to its clients across 140 countries. Besides, the company is also planning to launch a global technology centre (GTEC) in the region during 2012-13.
  • Denmark-based Danfoss Group is planning to invest US$ 100 million to set up a plant near Chennai. Danfoss is a producer of components for refrigeration and air conditioners and the new plant will be its largest R&D facility. Production is likely to commence from 2014. The new plant is will be an export-oriented unit, but will also cater to Indian markets. It is planned to have a production capacity of 2 million pieces a year.