Market Overview India: Engineering Industry

| Editor: Rosemarie Stahl

The Indian engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy.

Cumulative FDI inflows in engineering sector (billion USD).
Cumulative FDI inflows in engineering sector (billion USD).
(Source: Department of Industry Policy & Promotion, TechSci Research)

India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world.

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 capital goods and engineering turnover in India is expected to reach 125.4 billion USD by the fiscal year 2017.

Engineering exports from India in the fiscal year 2014-15 stood at 70.7 billion USD registering a growth of 14.6 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise.

India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Recently, India’s engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively.

Investments

The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing costs, 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) inflows into India’s miscellaneous mechanical and engineering industries during April 2000 to June 2015 stood at around 4,053.72 million USD, as per data released by the Department of Industries Policy and Promotion (DIPP).

Road Ahead

The engineering sector is a growing market. Spending on engineering services is projected to increase to 1.1 trillion USD by 2020. With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected to touch 120 billion USD by 2015.

Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a reality.

* Exchange Rate Used: 1 INR = 0.0147 USD as on March 01, 2016

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