Trade Analytics
Engineering and Capital Goods
Engineering exports grew 6.32 per cent year-on-year to US$ 81.02 billion in FY19.

Indian Engineering Industry Analysis

Latest update: January, 2020

Growth

 

Last Updated: January, 2020

The Indian engineering sector is divided into two major segments - heavy engineering and light engineering. The turnover of capital goods industry in India is estimated at US$ 70 billion in 2017 and is expected to grow to Rs 8,04,923.13 crore (US$ 115.17 billion) by 2025. Likewise, electrical equipment production is expected to reach Rs 6,98,900 crore (US$ 100 billion) by FY 2021-22 from Rs 39.06 crore (US$ 5.58 million) in 2017-18. The electrical equipment industry grew 13.7 per cent year-on-year during April 2018-January 2019. Overall growth index for electrical equipment industry for 2018-19 stood at 11.2 per cent.

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. In FY19, India’s engineering export have crossed Rs 5,80,087 crore (US$ 83 billion). Engineering exports grew 6.32 per cent year-on-year to Rs 5,66,248.78 crore (US$ 81.02 billion) in FY19. Engineering exports reached US$ 57.91 billion in FY20 (up to December  2019).

As per Mr Piyush Goyal, Minister for Commerce and Industry & Railways, the government will make all efforts to ensure that the exports of engineering goods reach US$ 200 billion by 2030.

As of 2018, India was the world’s eighth largest consumer and 12th in production of machine tools globally. Production of machine tools in the country grew 25.7 per cent y-o-y to Rs 7,293 crore (US$ 1.13 billion) in 2017-18, while exports reached Rs 355 crore (US$ 55.08 million). Production is forecasted to increase to Rs 9,000 crore (US$ 1.40 billion) in 2018-19. Construction equipment industry recorded sales of 98,204 and 78,109 units of construction equipment in 2018 and 2017, respectively. Construction equipment sales are expected to grow further to 110,815 units by 2022. Construction equipment market is projected to reach Rs 34,945 crore (US$ 5 billion) by FY20 from around Rs 30,052.7 crore (US$ 4.3 billion) in FY18.

Government has also announced to invest Rs 10,000,000 crore (US$ 1.5 trillion) in infrastructure over the next five years.

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.

Government has proposed granting of loans up to Rs 1 crore (US$ 0.15 million) for MSMEs within 59 minutes through a committed online portal. Under the Interest Subvention Scheme for MSMEs, Rs 350 crore (US$ 52.50 million) has been allocated for FY 2019-20.

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. Miscellaneous mechanical and engineering industries have received FDI inflows worth US$ 3.62 billion during  April 2000-September 2019.

Indian Engineering and Capital Goods Industry Report (January, 2020)
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