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.
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 & 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 during April-February 2015-16, together accounting for a sizeable chunk of US$ 5.17 billion.
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 March 2016 stood at around US$ 3,068.1 million, 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. It has also reduced the basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators.
The Government of India in its Union Budget 2016-17, has announced that the duty drawback scheme has been widened and deepened to include more products and countries. The government will continue to take measures to support the export sector. The government has also taken steps to improve the quality of technical education in the engineering sector by allocating a sum of Rs 500 crore (US$ 75.33 million) for setting up five more IITs in the states of Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
Steps have also been taken to encourage companies to perform and grow better. For instance, EIL was recently conferred the Navaratna status after it fulfilled the criteria set by the Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises, Government of India. The conferred status would give the state-owned firm more financial and operational autonomy.
Government of India has also taken initiatives to provide a level playing field to domestic and foreign private players bidding for the government contracts in defence sector. The government has withdrawn excise and customs duty exemptions granted to goods manufactured and supplied to the defence ministry by state-owned defence firms. These steps will also encourage participation of foreign Original Equipment Manufacturers such as Boeing, Airbus, Lockheed Martin, BAE Systems, etc., in the sector.
Prime Minister, Mr Narendra Modi announced a partnership between Bloomberg Philanthropies and the Ministry of Urban Development, Government of India, to advance the "Smart Cities Initiative." The Smart Cities Initiative is a historic effort to promote economic growth, improve governance, and deliver more effective and efficient public services to India's urban residents.
The engineering sector is a growing market. Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020.
The Union Budget 2016-17 has made record allocation of Rs 221,246 crore (US$ 33.07 billion) for several infrastructure projects which are further expected to provide a boost to the engineering sector. 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.
Exchange Rate Used: INR 1 = US$ 0.0149 as on September 29, 2016
References: Media reports, Press releases, EEPC India, Press Information Bureau (PIB)