The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sectors and represents 63% of the overall foreign collaborations. India’s engineering sector has witnessed a 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 strategic importance to India’s economy.
India, on its quest to become a global superpower, has made significant stride towards developing its engineering sector. The Government has appointed Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products, and services from India. India export 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 a high growth potential area as 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.
Turnover of the capital goods industry was estimated at US$ 92.00 billion in 2019 and is forecast to reach US$ 115.17 billion by 2025.
India exports engineering goods mostly to US and Europe, which account for over 60% of the total export. Engineering exports were recorded at US$ 75.90 billion in April (FY20) and reached US$ 60.25 billion in January (FY21). The Index of Industrial Production (IIP) for the electrical equipment industry stood at 92.0 in FY21.
The Index of Industrial Production (IIP) for the electrical equipment industry stood at 127.9 in September 2021.
In FY22 (until October), India exported engineering goods worth US$ 63.89 billion compared with the US$ 39.97 billion recorded in FY21 (until October).
In October 2021, exports of engineering goods from India stood at US$ 9.4 billion, a 50.89% increase from October 2020.
According to the National Association of Software and Service Companies (Nasscom), India’s share in the global engineering and research and development (ER&D) market is likely to expand at a CAGR of 12-13% to reach US$ 63 billion by 2025.
100% FDI is allowed through the automatic route, with major international players looking for growth opportunities to enter the Indian engineering sector. The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing cost, 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.
FDI inflows for miscellaneous mechanical and engineering sectors stood at US$ 3,720.4 million between April 2000 and June 2021 according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).
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% 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.
Turnover of capital goods industry is expected to increase to US$ 115.17 billion by 2025F. India’s engineering R&D market will increase from US$ 36 billion in FY19 to US$ 42 billion by FY22.
India needs Rs. 235 trillion (US$ 3.36 trillion) of investment in infrastructure in the next decade (2020 29).
The export of engineering goods is expected to reach US$ 200 billion by 2030.
Note: F- Forecast
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)
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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