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Indian Engineering Industry Analysis

February, 2018

The Indian engineering sector is divided into two major segments - heavy engineering and light engineering. The capital goods and engineering turnover in India is expected to have reached US$ 125.4 billion by FY 2016-17. Likewise, Electrical equipment market size is expected to reach US$ 100 billion by FY 2021-22. Comparative advantage vis-à-vis peers in terms of manufacturing costs, market knowledge, technology and creativity has been a driving force for engineering exports from India.

Construction equipment industry recorded sales of 76,000 and 68,000 units of construction equipment in FY16 and FY17 respectively. This is further expected to grow to around 96,730 units by 2018. Construction equipment market is projected to reach US$ 7 billion by 2020 from US$ 4.2 billion in FY17. Production of machine tools totalled Rs 5,803 crore (US$ 896.35 million), while exports stood at Rs 360 crore (US$ 55.61 million) in FY17.

Companies engaged in the engineering sector are virtually on a roll. Capacity creation in sectors like infrastructure, power, mining, oil & gas, refinery, steel, automotive, and consumer durables has been driving demand in the engineering sector. Separately, the approval of significant number of special economic zones (SEZs) across the country and the development of the Delhi Mumbai Industrial Corridor (DMIC) across seven states is expected to further bolster the engineering sector.

With 100 per cent Foreign Direct Investment (FDI) allowed through the automatic route, and initiatives like ‘Make in India’, major international players have entered the Indian engineering sector due to significant growth opportunities available. The engineering sector has received cumulative FDI inflows worth US$ 3.39 billion during April 2000 to December 2017.

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