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ENGINEERING INDUSTRY IN INDIA

December, 2013

Introduction

India’s engineering industry accounts for 27 per cent of the total factories in the industrial sector and represents 63 per cent of the overall foreign collaborations. It has emerged as the largest contributor to the country’s total merchandise exports. India’s exports of engineering goods have reported an annual increase of 14.72 per cent in November 2013 over the corresponding month of 2012, as per Mr Anupam Shah, Chairman, Engineering Export Promotion Council (EEPC), India.

Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive, and consumer durables are driving demand in the engineering sector. The engineering sector is the largest of the industrial sectors in India. It is a diverse industry with a number of segments, and can be broadly categorised into two parts, namely, heavy engineering and light engineering. The sector has a comparative advantage in terms of manufacturing costs, market knowledge, technology and creativity.

The Government of India also plays a crucial role in developing the engineering section of the economy. The engineering industry has been de-licensed and enjoys 100 per cent foreign direct investment (FDI). Further, the National Policy on Electronics is formulated by the Government of India to boost India's electronics systems and design the manufacturing industry and improve its share in the global market.

Exports

India's engineering exports, the second largest contributor to the country's export basket, aggregated to US$ 56.7 billion in the fiscal year 2012-13. The exports have registered a compound average growth of 12.6 per cent in the five year period of 2007-08 and 2012-13.

Transport equipment is the leading contributor to engineering exports. The segment accounted for 32.5 per cent of the total engineering exports during FY13. Machinery and instruments is the other major contributor with a share of 26.8 per cent. 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.

Besides the ASEAN (Association of Southeast Nations), India has operationalised Free Trade Agreements (FTAs) with important trading partners including Japan and South Korea in the past few years. The sector's shipment to Japan grew by an impressive 17 per cent during April-November, 2013 to US$ 568 million from US$ 485 million in the same period last year. Similarly, the exports to South Korea has registered a growth of over 13 percent to US$ 739 million during the period.

Kerala achieved a growth of 170 per cent in terms of export of engineering goods when compared to the previous year. The state exported engineering goods worth Rs 265 crore (US$ 42.87 million) during the last fiscal, against the overall national exports which stood at Rs 3.1 trillion (US$ 50.15 billion).

Key Developments and Investments

The miscellaneous mechanical and engineering industries’ sector-wise foreign direct investment (FDI) inflows from April 2000 to September 2013 were calculated at US$ 2,484.06 million, as per the Department of Industrial Policy and Promotion (DIPP).

  • Voltas Ltd, an air-conditioning and engineering services company, has secured three orders worth Rs 1,000 crore (US$ 161.72 million) in West Asia. One order is for an integrated health centre and workers’ hospital in the old industrial area of Qatar. Another order is for a sports hall and administrative office.

    Voltas has also got a contract to develop Oman’s first beachfront and a five-star hotel. This project will be executed by Voltas’ Oman-based joint venture.

  • IL&FS Engineering and Construction Co Ltd has received a Letter of Award (LoA) from Paschimanchal Vidyut Vitran Nigam Ltd for execution of rural electrification works worth Rs 149.68 crore (US$ 24.21 million) in Bulandshahr, Uttar Pradesh (UP). The project comes under the Government of India scheme of Rajeev Gandhi Grameen Vidyutikaran Yojana (RGGVY) Phase-II and is expected to be executed within 18 months on a turnkey basis.

    The company is already executing rural electrification works for West Bengal State Electricity Distribution Company Ltd and for Power Grid Corporation of India Ltd in Orissa.

  • Shriram EPC Ltd has won orders worth Rs 389 crore (US$ 62.94 million) under its water infrastructure business. The company provides integrated design, engineering, procurement, construction and project management services for power plants, renewable energy projects, process and metallurgical plants and municipal service sector projects.

  • Tech Mahindra has established an engineering college in association with the French university, Ecole Centrale and Jawaharlal Nehru Technological University (JNTU). The company would also set up satellite centres in cities such as Jaipur, Pune, Chennai and Goa after consolidating the activities of college.