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Indian Engineering Industry Analysis

August, 2013

The Indian engineering sector is divided into two major segments- heavy engineering and light engineering. The sector has a comparative advantage in terms of manufacturing costs, market knowledge, technology and creativity. Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotives, and consumer durables are driving demand in the engineering sector.

The total exports of Indian engineering sector stood at US$ 56.7 billion during FY13 and is expected to grow to US$ 125 billion by FY14. Over the period FY08-13, exports from the sector have posted a compound annual growth rate (CAGR) of 12.6 per cent. Transport equipment is the leading contributor to engineering exports. The segment accounted for 32.5 per cent of the total engineering exports during FY13.

The engineering industry has been delicensed and 100 per cent foreign direct investment (FDI) is allowed in the sector. The sector has received cumulative FDI of US$ 19.9 billion over April 2000-April 2013.

Engineering Services Outsourcing (ESO) is a huge opportunity for India over the next few years. By 2020, the ESO market in India is expected to reach US$ 40-50 billion, driven by the increasing onshore to offshore movement of services.

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