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Engineering exports were US$ 75.90 billion in FY20 and reached US$ 39.90 billion in FY21 (as of October 2020).

Indian Engineering Industry Analysis

    Last updated on Sep, 9 2021

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 is divided into two major segments - heavy engineering and light engineering. 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.

Comparative advantage vis-a-vis peers in terms of manufacturing cost, market knowledge, technology and creativity has been the driving force behind engineering export from India. Index of industrial production (IIP) for electrical equipment industry stood at 105.5 in FY20.

Export of telecom instruments increased from US$ 2.58 billion in 2018-19 to US$ 4.68 billion in 2019-20.

In May 2021, the value of engineering exports from India was US$ 8.64 billion, up by 53% in May 2020.

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

The government expanded the ‘National Infrastructure Pipeline (NIP)’ to 7,400 projects. ~217 projects worth Rs. 1.10 lakh crore (US$ 15.09 billion) were completed as of 2020.

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 have been driving the 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.

The 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) was allocated for FY20. In November 2020, the government set up a 22-member inter-ministerial committee for strengthening India’s capital goods sector.

With 100% 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. According to The United Nations Conference on Trade and Development (UNCTAD), India rankled among the top 10 recipients of Foreign Direct Investment (FDI) in 2019, attracting US$ 49 billion in inflows, a 16% increase from the previous year, driving FDI growth in South Asia. FDI inflows for miscellaneous mechanical and engineering sectors stood at US$ 3,669.51 million between April 2000 and December 2020 according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

According to India Ratings and Research (Ind-Ra), the solar production-linked insurance (PLI) scheme will support 8-13% of photovoltaic energy plant requirements until 2029-30 and will help add 20 GW (gigawatts) of energy in the next five years.

Indian Engineering and Capital Goods Industry Report (July, 2021)
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