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September, 2012


Given its intense integration with all the major industrial segments of the economy, India's engineering industry is not less than a blood-line for the country. The engineering industry accounts for 3 per cent of the gross domestic product (GDP) and represents about 27 per cent of the total industrial factories in the organised sector.

Research and Development (R&D) is the mainstay of any engineering segment. The Indian R&D ecosystem took off about 25 years ago and is proving to be very fruitful for multinational companies (MNCs) till date, owing to the huge cost arbitrage it offers. Increasingly focussed on innovation, leadership and better value addition, the R&D centres of MNCs delivered cost savings of about US$ 70 billion over 2007-12 to their parent companies, according to a study by Zinnov. The current pool of over 2, 10, 000 engineers is growing by about 9 per cent per annum while the current base of MNC R&D centres is about 870 in India.


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 stood at US$ 4.67 billion in August 2012 while they valued around US$ 20 billion for April-August 2012-13.

The Commerce Ministry 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 June 2012 was calculated at US$ 2, 265.76 million, as per the Department of Industrial Policy and Promotion (DIPP).

  • Larsen & Turbo (L&T) has inaugurated its manufacturing facility for switchgear products at Vadodara, Gujarat. The new plant, an initiative for the company's Electrical & Automation business expansion, will manufacture air circuit breakers (ACBs) and moulded case circuit breakers (MCCBs)
  • Bharat Heavy Electricals Ltd (BHEL) has commissioned a 5 MW grid-connected solar power plant at Shivasamudram near Mandya. This is the single largest solar photovoltaic (PV) power plant in Karnataka which has been established for the state-owned power producer, Karnataka Power Corporation Limited (KPCL), at a cost of Rs 62 crore (US$ 11.61 million)
  • Japan is planning to set up auto component and engineering park in the state of Gujarat. Recently a delegation from Japanese External Trade Organisation (JETRO) was in Gandhinagar to decide on a location and is in continuous discussions with the Gujarat Industrial Development Corporation (GIDC)
  • Dutch electronics major Philips is planning to expand its R&D facility, Philips Innovation Campus, in Bangalore to intensify focus on healthcare and development of localised products for India. The company had initiated research for lighting products in 2011 while it rolled out mobile applications like 'Sanjivni' (for collection of patient information in rural areas) and 'Envision' (to stream music, photos and videos from iPhone and iPads to be connected to Philips players)
  • CK Birla group firm National Engineering Industries Ltd is escalating its investments to Rs 700 crore (US$ 131 million) for 2012-16 to set up a new plant and expand production facility in Bangalore. The company, which sells its bearings under the NBC brand, intends to partially acknowledge export demand from markets like the US, Germany, Brazil and South Africa through this expansion