The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy.
India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world. The Indian semiconductor industry offers high growth potential areas as the industries which source semiconductors as inputs are themselves witnessing high demand.
India became a permanent member of the Washington Accord (WA) in June 2014. The country is now a part of an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers.
The capital goods and engineering turnover in India is expected to reach US$ 125.4 billion by FY17.
India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports.
Recently, India's engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively. Sri Lanka, Nepal and Bangladesh have also emerged as the major destinations for India's engineering exports.
According to the India Electronics & Semiconductor Association, the Indian Electronic System Design and Manufacturing (ESDM) market is expected to grow at a CAGR of 16-23 per cent to reach US$ 228 billion by 2020 from $100 billion in 2016-17.
The electrical equipment industry observed a growth of 9.7 per cent during April-September 2017. Also, Growth of India’s mining and construction equipment sector is expected at 13-17 per cent in 2017 driven by increase in infrastructure spending.
According to a study by The Associated Chambers of Commerce of India (ASSOCHAM) and NEC Technologies, the demand for electronic products in India is expected to grow at a Compound Annual Growth Rate (CAGR) of 41 per cent during 2017-20 to US$ 400 billion by 2020.
According to data from the Engineering Export Promotion Council of India, engineering exports from India grew 11.33 per cent year-on-year to reach US$ 65.23 billion in FY 2016-17. Exports of electrical machinery rose to US$ 4.6 billion in FY 2016-17 from US$ 3.7 billion in FY 2015-16.
India’s engineering exports recorded a growth of 22.75 per cent to reach US $ 56,091.89 million in April-December 2017. Exports during December 2017 grew 25.41 per cent year-on-year to US$ 7,133.93 million from US$ 5,688.32 million in the same period a year ago.
The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing costs, technology and innovation. The above, coupled with favourable regulatory policies and growth in the manufacturing sector has enabled several foreign players to invest in India.
The foreign direct investment (FDI) inflows into India's miscellaneous mechanical and engineering industries during April 2000 to September 2017 stood at around US$ 3.36 billion, as per data released by the Department of Industries Policy and Promotion (DIPP).
In the recent past there have been many major investments and developments in the Indian engineering and design sector:
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 per cent 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.
The engineering sector is a growing market. Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020. The government, in consultation with semiconductor industry, has increased focus on the ESDM sector in last few years. Some of the initiatives outlined in the National Electronics policy and the National Telecom policy are already in the process of implementation, such as Preferential Market Access (PMS), Electronics Manufacturing Clusters (EMC) and Modified Special Incentive Package Scheme (M-SIPS).
India’s capital good sector is expected to triple in size to Rs 7.5 trillion (US$ 116 billion) and add 21 million jobs by 2025.
Exchange Rate Used: INR 1 = US$ 0.0155 as of January 04, 2018.
Note: BHEL* - Bharat Heavy Electricals Limited
References: Media reports, Press releases, EEPC India, Press Information Bureau (PIB), Department of Industrial Policy and Promotion (DIPP), The Confederation of Indian Industry (CII), Indian Electrical & Electronics Manufacturers’ Association (IEEMA).