Advantage India
Robust
Demand
*The Indian electrical equipment market is set to experience significant growth in the coming years, with a forecasted incremental growth of Rs. 6,44,533 crore (US$ 76.24 billion) at a compound annual growth rate (CAGR) of 14.3% from FY24 to FY28.
*Market size for the Indian Construction Equipment Market stood at US$ 7.2 billion in FY23 and is forecasted to grow at a CAGR of 15% for next 5 years, as per the estimates of CII.
Attractive
Opportunities
*In the Union Budget FY26, the government announced capex of Rs. 11,21,000 crore (US$ 128.42 billion) (3.1% of GDP).
*5,614 km highways built in FY25 vs 5,150 km target; record capex Rs. 2,50,000 crore (US$ 28.53 billion) (↑21% YoY, ↑45% vs FY23).
*An Urban Infrastructure Development Fund (UIDF) will be managed by National Housing Bank, which will enable creation of infrastructure in Tier 2 and 3 cities by supporting viability gap funding, enabling creation of more bankable projects, enhancing access to external funding, among others.
Policy
Support
*De-licensed engineering sector; 100% FDI permitted.
*The capital goods sector in India benefits from a liberal policy regime, with no industrial licensing, 100% FDI under the automatic route (except from land-border nations), unrestricted technology transfer payments, and no import or export restrictions.
*The National Capital Goods Policy (2016) aims to boost India’s capital goods sector by raising its manufacturing share from 12% in 2016 to 20% by 2025, doubling production, increasing exports to 40% of output, and advancing technology capabilities to global standards.
*Indian Electrical Equipment Industry Mission Plan (2012-22), aims to make India as a preferred destination for production of electrical equipment to achieve an output of US$ 100 billion by balancing the trade deficit in the sector.
Higher
Investments
*To enhance opportunities for private investment in infrastructure - Infrastructure Finance Secretariat is being established who will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power.
*The Government’s ‘Vision Plan 2030’ proposed an action plan to become a manufacturing and export hub for construction equipment and propel the development of world-class infrastructure in the country.
Introduction
India’s Capital Goods manufacturing industry serves as a strong base for its engagement across sectors such as Engineering, Construction, Infrastructure and Consumer goods, amongst others.
The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Demand for engineering sector services is being driven by capacity expansion in industries like infrastructure, electricity, mining, oil and gas, refinery, steel, automobiles, and consumer durables.
India has a competitive advantage in terms of manufacturing costs, market knowledge, technology, and innovation in various engineering sub-sectors. India’s engineering sector has witnessed remarkable growth over the last few years, driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of huge strategic importance to India’s economy.
The development of the engineering sector of the economy is also significantly aided by the policies and initiatives of the Indian government. The engineering industry has been de-licensed and allows 100% foreign direct investment (FDI). Additionally, it has grown to be the biggest contributor to the nation's overall merchandise exports.
India became a permanent member of the Washington Accord (WA) in June 2014. it is now part of an exclusive group of 17 countries that are permanent signatories of the WA, an elite international agreement on engineering studies and the mobility of engineers.
Market Size
In FY25, exports of engineering goods reached at Rs. 9,86,328 crore (US$ 116.67 billion).
The top 5 export destinations for engineering goods during FY25 were USA, UAE, Saudi Arabia, Germany and Italy.
Capital Goods sector contributes 1.9% to overall India’s GDP.
The Quick Estimates of IIP stands at 153.3 against 151.0 in June 2024. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of June 2025 stand at 123.2, 152.3 and 217.1 respectively.
India’s total installed power capacity reached 476 GW as of June 2025.
The heavy engineering and machine tools sector are a vital component of the capital goods industry. Currently, India's capital goods sector is receiving considerable focus due to its essential contribution to industrial growth and economic development. Notably, the production within this sector has surged from Rs. 2,29,533 crore (US$ 27.2 billion) in CY15 to Rs. 4,29,001 crore (US$ 50.7 billion) in CY24.
The market size of the Plastic machinery sector stood at US$ 0.5 billion.
Indian Process Plant and Machinery (PPM) industry has estimated capacity of US$ 6.00 billion per annum
Foundry industry has a turnover of approx. US$ 20 billion with exports of approx. US$ 3.54 billion.
There are 750-800 domestic Medical Devices manufacturers in India, with an average investment of US$ 2.3-2.7 million and an average turnover of US$ 6.2-6.9 million.
The Indian industrial fasteners market was valued at US$ 9,064 million in 2022 and is projected to reach US$ 17,868 million by 2030, registering a CAGR of 7.9% during the forecast period (2023-2030).
India steam boiler systems market size is expected to reach nearly US$ 22.56 billion by 2027 with the CAGR of 4.63% during the forecast period.
The India generator sets market is expected to grow at a CAGR of more than 5% over the period of 2020-2025.
The India power transformer market is expected to rise at a CAGR of more than 3% during the period of 2020-25.
India switchgear market size was estimated at US$ 9.75 million in 2022 and is expected to grow at CAGR of 7.12% reaching a value of US$ 18.23 million by 2029.
India’s automotive industry is worth more than US$ 222 billion, contributes 8% of the country’s total export, accounts for 7.1% of India's GDP and is set to become the 3rd largest in the world by 2030.
The Indian agricultural equipment market has reached a value US$ 10.25 billion in 2023 and is anticipated to grow at a CAGR of 5.24% through 2029.
The Indian machine tool market size reached US$ 1.5 billion in 2023 and is expected to reach US$ 3.2 billion by 2032, exhibiting a growth rate (CAGR) of 8.2% during 2024-32.
The boiler market in India is expected to grow from Rs. 5,859 crore (US$ 704.6 million) in FY19 to Rs. 8,831 crore (US$ 1.1 billion) in FY30 with an expected CAGR of 3.8%.
Investments
Engineering accounts for about 25% of India’s total global exports in the goods sector and is one of the largest foreign exchange earners.
As per the budget estimates (BE) of FY26, the production-linked incentive (PLI) scheme for the automobile and auto components sector got a massive boost at Rs 2,818.85 crore (US$ 322.90 million) in FY26.
Recent Achievements under the Capital Goods Scheme:
- Sitarc, Coimbatore: Developed 6-inch BLDC submersible pump (88% motor efficiency, 78% pump efficiency), cutting imports by 80%; awarded by UNIDO.
- CMTI: Introduced high-speed rapier loom (450 RPM) at ITMA 2023, Milan; implemented IIoT on Toyota’s engine line controlling 64 machines.
- ARAI, Pune: Established India’s first battery and BMS testing facility.
- I-4.0 India @ IISc Bengaluru: Delivered 6 smart technologies, 5 smart tools, 14 solutions in digital twin, VR, robotics, sustainability, additive manufacturing.
- ARAI-AMTIF Industry Accelerator: Enabled Raptee Energy to launch high-voltage motorcycle; developed thermally stable sodium-ion batteries.
- Centres of Excellence (CoEs): Eight CoEs established, developing 30 niche indigenous technologies in machine tools, additive manufacturing, textile machinery, welding robots, alloy design, earth moving machinery, and sensor technologies at leading institutes (IITs, IISc, CMTI).
- Common Engineering Facility Centres (CEFCs): 15 CEFCs set up, including four Industry 4.0 SAMARTH Centres (IISc Bengaluru, C4i4 Lab Pune, CMTI Bengaluru, IIT Delhi) and six web-based Technology Innovation Platforms (TIPs).
- Technology Innovation Platforms: TIPs connect India’s technical resources and industry to identify challenges, crowdsource solutions, and support start-ups and angel funding.
- Outreach: Over 76,000 students, experts, institutes, industries, and labs have registered on these platforms.
- Siemens Energy India is undertaking a capex of Rs. 280 crore (US$ 32.8 million) at its Aurangabad, Maharashtra factory. Earlier in FY24, the company had announced Rs. 460 crore (US$ 53.9 million) for its transformer factory in Kalwa, Maharashtra, and Rs. 330 crore (US$ 38.6 million) for its Gas-Insulated Switchgear (GIS) factory in Goa.
- Larsen & Toubro allocated land in Gujarat for a green hydrogen and derivatives plant and acquired the remaining 26% stake in L&T Special Steels and Heavy Forgings in FY25.
- In October 2023, the Automotive Research Association of India (ARAI) signed an agreement with IIT Guwahati to set up a common engineering facility centre titled ‘Digital Twin Centre for Emerging Automotive Systems’ in a hub and spoke model.
- In July 2023, Bharat Heavy Electricals Limited (BHEL) signed a Technical Assistance and License Agreement with General Electric Technology GmbH Switzerland for Gas Turbines.
- Creation of a significant number of special economic zones (SEZs) across the country has been approved.
- The development of Delhi Mumbai Industrial Corridor (DMIC) across seven states will further bolster the engineering sector.
- Reliance Defence and Engineering Ltd has signed an agreement with the US Navy for undertaking service, maintenance, and repair of Seventh Fleet of US Navy at the Reliance Shipyard at Pipavav in Gujarat.
- American plane maker Boeing Corporation has launched the Boeing India Engineering & Technology Centre in Bengaluru.
In the recent past, there have been many major investments and developments in the Indian engineering and design sector:
- The IMARC Group expects the machine tools market to reach US$ 2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28.
- The Indian government announced a reduction in customs duty on textile machinery, spares, and accessories. The changes include bringing shuttleless looms under the category of zero rate of duty.
- Passenger Vehicle sales again crossed the 1 million mark in Q1 FY26 (1.01 million units), it is the second time in a row in Q1 in last 2 years.
- The total EV sales reached 1.67 million in 2024, up from 1.18 million in 2023.
- Passenger vehicle shipments rose by 15% to 7,70,364 units in FY25 as against 6,72,105 units in FY24.
- In February 2023, Reliance Industries Limited (RIL) and its vehicle partner Ashok Leyland unveiled India’s first Hydrogen Internal Combustion Engine (H2-ICE) technology solution for heavy-duty trucks at the India Energy Week in Bengaluru.
- State-run PSUs Nuclear Power Corporation of India Ltd (NPCIL) and Bharat Heavy Electricals Ltd (BHEL) have signed a memorandum of understanding (MoU) in April 2023 to jointly pursue business opportunities in the area of Nuclear Power Plants based on Pressurized Heavy Water Reactor (PHWR) technology.
- With 100% FDI allowed through the automatic route, major international players such as Cummins, GE, ABB, and Alfa Laval have entered the Indian engineering sector due to growth opportunities.
Government Initiatives
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% 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.
- MHI is implementing the Scheme for ‘Enhancement of Competitiveness in the Indian Capital Goods Sector Phase 2’ in order to facilitate adoption of Industry 4.0 and to promote investments in manufacturing sector, indigenization of technologies and creation / augmentation of common service infrastructure / Testing facilities. Rs. 250 crores have been allocated under this Scheme for Financial Year 2023-24.
- The Ministry of Heavy Industries (MHI) launched two Production Linked Incentive (PLI) Schemes, namely PLI Scheme for Automobile and Auto Component Industry, and PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage.
- To increase the employability of engineering graduates in the country, AICTE (All India council of technical education) leadership is taking a lot of efforts and recommends model curriculum for engineering programs like AI, IoT, Robotics, Block chain, Machine learning, Data Science and Cyber security.
- In the Union Budget 2025-26, the government allocated Rs. 2,87,333 crore (US$ 330.8 billion) to the Ministry of Road Transport and Highways, a 2.4% rise over Rs. 2,80,500 crore in 2024-25.
- The Indian electrical equipment market is set to experience significant growth in the coming years, with a forecasted incremental growth of Rs. 6,44,533 crore (US$ 76.24 billion) at a compound annual growth rate (CAGR) of 14.3% from FY24 to FY28.
- India has constructed 5,614 kms of highways in FY25 comprising expressways, national, state highways, district and village roads.
- The automobile component industry turnover stood at Rs. 3.3 lakh crore (US$ 39.6 billion) during first half of FY25, registering a revenue growth of 11.3% as compared to first half of FY24.
- The All-India Council for Technical Education (AICTE) has launched educational books for diploma and under-graduate engineering courses in Marathi language so that students can learn better in their native language.
- The AICTE has entered into collaborations with the MSME ministry, NHAI and DM offices in 150 districts to facilitate engineering internships for students.
- Prime Minister Mr. Narendra Modi, on the country's 75th Independence Day, announced plans to invest Rs. 100 trillion (US$ 1.35 trillion) in infrastructure to stimulate economic development and generate employment.
Road Ahead
India’s engineering and capital goods sector is poised for strong and sustained growth, driven by infrastructure development, industrial expansion, and rising exports. The electrical equipment market alone is expected to grow by nearly US$ 33 billion between 2021 and 2025, supported by strong demand across power, manufacturing, and infrastructure. Similarly, the India Engineering Research and Development (ER&D) services market is estimated at US$ 133.71 billion in 2025 and is projected to reach US$ 217.90 billion by 2030, growing at a CAGR of 10.3%.
Construction and heavy machinery will remain critical growth drivers. The construction equipment market, valued at Rs. 69,046 crore (US$ 7.91 billion) in 2025, is projected to reach Rs. 1,02,827 crore (US$ 11.78 billion) by 2030, while equipment sales are expected to cross 165,000 units by 2028. The earthmoving and construction equipment (ECE) industry, already the third-largest globally, grew by 26% year-on-year to 135,650 units in FY24, with demand expected to accelerate further alongside infrastructure projects. The machine tools market, catering to automobiles and textiles, is also expected to touch US$ 2.5 billion by 2028, growing at a CAGR of 9.4%.
In the power and energy-linked segments, steady growth is anticipated. The steam boiler systems market is projected to reach nearly US$ 22.56 billion by 2027, while the generator sets market is expected to expand at over 5% CAGR through 2025. The power transformer market, valued at Rs. 16,063 crore (US$ 1.9 billion) in FY22, is expected to nearly double to Rs. 28,744 crore (US$ 3.4 billion) by FY30.
Automobiles and electric mobility will play a transformative role. Passenger vehicle sales touched a record 4.3 million units in FY25, while retail automobile sales grew 6.46% year-on-year. India’s EV sector is accelerating rapidly, with total EV sales crossing 20 lakh in FY25, half of which came from electric two-wheelers. Exports also surged, with overall automobile exports rising 19% to 5.3 million units in FY25. Passenger vehicle exports hit an all-time high of 7,70,364 units, boosted by strong global demand for India-manufactured models.
India is also emerging as a significant player in high-value exports. Engineering goods exports are expected to reach US$ 200 billion by 2030, while medical devices exports are set to touch US$ 10 billion by 2025. The government is pushing to make India a major exporter of telecom equipment within the next two to three years, aligned with the Make in India initiative and broader efforts to improve ease of doing business.
Together, these trends indicate that India’s engineering, capital goods, and allied industries will continue to grow as vital enablers of economic expansion, infrastructure development, and global trade leadership.
Note: Passenger Vehicles data excludes BMW, Mercedes, Tata Motors & Volvo Auto
References: Media reports, press releases, EEPC India, Press Information Bureau (PIB), Department for Promotion of Industry and Internal Trade (DPIIT), The Confederation of Indian Industry (CII), Indian Electrical & Electronics Manufacturers’ Association (IEEMA), Union Budget 2023-24, Union Budget 2025-26
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