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Engineering and Capital Goods
Engineering exports goods is expected to reach US$ 200 billion by 2030.

Engineering Industry in India

    Last updated on Sep, 4 2020

Indian Engineering and Capital Goods Industry Report  (Size: 468.22 KB ) (August, 2020)

Introduction

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.

Market size

The turnover of capital goods industry in India is expected to grow to Rs 8.05 lakh crore (US$ 115.17 billion) by 2025.

India exports engineering goods mostly to US and Europe, which account for over 60 per cent of the total export. Engineering export for the period of FY20 stood at US$ 76.26 billion. Index of industrial production (IIP) for electrical equipment industry stood at 105.5 in FY20.

Investments

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.

The Foreign Direct Investment (FDI) inflow into India's miscellaneous mechanical and engineering industries between April 2000 and March 2020 stood at around US$ 3.63 billion, as per 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:

  • In June 2019, Joysons Safety Systems (JSS) announced merger of its two joint ventures in India into a tri-party joint venture called as Joyson Anand Abhishek Safety Systems Private Limited (JAASS).
  • In December 2019, KEC International bagged orders worth Rs 1,520 crore (US$ 217.48 million) for various business verticals.
  • As of December 2019, ELGi Compressors USA, Inc., a subsidiary of Elgi Equipments Limited, a global supplier of compressed air solutions, acquired Michigan Air Solutions.
  • As of December 2019, L&T Technology Services bagged a multi-million-dollar engineering, procurement, and construction management project in Europe.

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 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.

  • Government has planned an investment of Rs 100 lakh crore (US$ 1.43 trillion) in infrastructure sector over the next five years.
  • The Government announced Rs 150,000 (US$ 2,250) income tax deduction on interest paid on loans for purchase of electric vehicles the Union Budget 2019-20.
  • The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for investors by amending the M-SIPS scheme in order to further incentivise investment in electronics sector, create employment opportunities and reduce dependence on import by 2020.

Road Ahead

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$ 28 billion in FY18 to US$ 42 billion by FY22F.

India needs Rs 235 trillion (US$ 3.36 trillion) of investment in infrastructure in the next decade.

The export of engineering goods is expected to reach US$ 200 billion by 2030.

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123

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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