Académique Documents
Professionnel Documents
Culture Documents
BRIEF REPORT
ON
ENGINEERING SECTOR IN INDIA
January 2015
1. OVERVIEW
1.1
Background
Indian engineering industry has witnessed an unprecedented growth in the past few years as a result
of increased investment in infrastructure development and industrial production. Today, India has a
diversified industrial machinery/capital base competent of catering to complex requirements and
demands for an entire range of industrial machinery. The engineering industry plays a significant role
in the development of other industrial sectors in the economy. This sector is very closely linked with
the manufacturing and infrastructure sectors of the economy. The quality and cost of engineering
products depends on the quality of the parent machine tools and their automation levels. The
development of machine tool industry is, therefore, of great importance for a competitive and selfreliant industrial structure.
The Indian engineering sector is of strategic importance to the economy owing to its intense
integration with other industry segments. Development in sectors such as infrastructure, power,
mining, oil and gas, refinery, steel, automotives, and consumer durables are driving demand in the
engineering sector. Major foreign players are also confident and have big expectations from the
Indian engineering segment as it enjoys a comparative advantage in terms of manufacturing costs,
market knowledge, technology and creativity. The total exports of Indian engineering sector stood at
US$ 56.7 billion during Fiscal Year 2013 and are anticipated to grow to US$ 125 billion by Fiscal
Year 2014. Exports from the engineering segment have registered a compound annual growth rate
(CAGR) of 12.6% over the period Fiscal Year 2008-13 wherein transport equipment is the leading
contributor to engineering exports.
Engineering
Heavy
Engineering
Heavy
Electrical
Heavy
Engineering
and Machine
Tools
Light
Engineering
Automotive
Low
Technology
Products
High
Technology
Products
Page 2 of 13
Industrial
Majors
(Refining
Automotive
textile)
Government
(Public
Investment)
Indian
Engineering
Sector
Power Utilities
(Generation,
transmission,
& Distribution
Retail
Consumer
(Pumps &
Motors)
Page 3 of 13
2.1
Heavy Engineering
The engineering industry in India manufactures a variety of products, with heavy engineering goods
accounting for majority of the production. Most of the leading players in the heavy engineering
goods segment manufacture high value heavy engineering goods using high end technology. The
requirement of huge capital investments acts as an entry barrier. Consequently, the small and
unorganized firms have small market presence. The unorganized sector specializes in manufacturing
low-technology products while a few small scale units are involved only in assembly of imported
components. This segment caters to the replacement market for few products such as low quality
small bearings.
2.2
Light Engineering
On the other hand, manufacturers of light engineering goods use medium to low-end technology.
The entry barrier is low, owing to relatively lower requirement of capital and technology. This
segment is characterized by dominance of small and unorganized players, which manufacture low
value-added products. However, a few medium and large scale firms produce high value-added
products. This segment is also characterized by small capacities and high level of competition.
Classification of Heavy & Light engineering sub-segments
Heavy engineering sector
Textile machinery
Cement machinery
Sugar machinery
Rubber machinery
Material handling equipment
Oil field equipment
Metallurgical
Mining machinery
Dairy machinery
Machine tool
Source: Ministry of Heavy Industries & Department of Industrial Policy & Promotion
Page 4 of 13
Growing demand
Capacity creation in sectors such as
infrastructure, power, mining, oil & gas,
refinery, steel, automotives, and consumer
durables driving demand in the engineering
sector
Rising demand for electrical and
construction equipment
Attractive opportunities
Nuclear capacity expansion to provide
significant business opportunities to the
electrical machinery industry
Rapid increase in infrastructure investment
and industrial production to fuel further
growth
Engineering
Sector
Higher investments
Comparative advantage vis--vis peers in
terms of manufacturing costs, market
knowledge, technology and creativity
Highly organized sector and dominated by
large players employing over four million
skilled and semi-skilled labour
Policy support
De-licensed engineering sector; 100 per
cent FDI permitted
Cumulative FDI totaled USD 19.9 billion
over April 2000-April 2013 due to policy
support
Page 5 of 13
2.3
Major markets
The engineering sector is one of the major contributors to the country's total merchandise
shipments. The US and Europe together account for over 60% of India's total engineering exports.
Engineering exports mainly include transport equipment, capital goods, other machinery/equipment
and light engineering products like castings, forgings and fasteners. The Ministry of Commerce and
Industries has set a target of shipping US$ 125 billion worth of engineering goods by the end of
2013-14. Indian engineering companies are scouting for newer markets (like Latin America, Africa
etc.) for exports along with strengthening their base in the US and Europe. Engineering goods
represent India's third-biggest export sector which rose 2% in August 2013. Engineering exports are
projected to cumulatively expand by 22% in September-December 2013 to US$ 21.5 billion against
US$ 17.1 billion last fiscal.
Transport equipment is the leading contributor to engineering exports. The segment accounted for
32.5 per cent of the total engineering exports during FY13* (*Latest updated data).
32.5%
9%
Machineryand
Instrument
Manufacturesofmetals
17.7%
26.8%
Primaryandsemi
furnishedironandsteel
Others
Page 6 of 13
2.4
Defence
Auto components
Power transmission
and distribution
(T&D)
Material handling
equipment
Machine tools
Budget for the defence sector is expected to grow 8 per cent until
2014; of this, 54 per cent would be earmarked for procuring
manufactured items which is likely to translate into a market
opportunity of USD91 billion over 20102014
Government initiatives, such as allowing private sector
participation, have been reinforced by opening up the sector to 26
per cent FDI, and its offset policy is expected to enhance private
sector (including SME) participation
Page 7 of 13
2.5
Page 8 of 13
3. MARKET PLAYERS
Top players in the engineering sector are
Name of the
company
Parent Company
Output
Product &
Services
Plants
Public sector
enterprise. Indias
largest engineering
and manufacturing
enterprise
Caters to power
generation and
transmission,
transportation
(especially
railways),telecom,
renewable energy
& industry at
large.
14 manufacturing
divisions, four
power sector
centers, over 100
project sites, eight
service centers
and 18 regional
offices.
ABB Ltd
Private Company
Transformers,
Facilities are
Switch
Gears, located at
Control Gears
Bangalore,
Faridabad, Halol,
Haridwar
Siemens Ltd
Flagship of the
Revenues (FY 13)
Siemens Group in $2.6 billion
India. Siemens AG,
the parent
company holds
54.63 percent in
Siemens Ltd
Power generation
and
Distribution
equipment,
industrial projects
and equipment,
transportation
systems,
communication
and healthcare
products
Has plants at
Aurangabad,
Nashik, Goa,
Thane and
North 24
Parganas (West
Bengal)
Crompton
Greaves
Part of the
Avantha Group
Largest private
sector enterprise
in the business of
electrical
engineering
Facilities are
located at
Bhind, Mumbai,
Nashik, Hosur,
Goa
BHEL
Page 9 of 13
Larsen &
Toubro Ltd
(L&T)
Four segments
namely
Engineering and
Construction
(E&C), Cement,
Electrical and
electronics and
Diversified
business. It also
has 19
subsidiaries
Facilities are
Coimbatore in
Tamil Nadu,
Kurnool, and
District in
Andhra Pradesh
and Hassan in
Karnataka.
Page 10 of 13
4. SWOT ANALYSIS
Engineering Sector SWOT Analysis
Strengths
Opportunity
Weakness
Page 11 of 13
5. GOVERNMENT POLICIES
5.1
Government Initiative
Governments focus on infrastructure development is expected to keep demand for the engineering
sector high. Continued growth of manufacturing sector and favorable regulatory policies would
further propel the sectors growth. Engineering Services Outsourcing (ESO) services from India has
the potential to exceed US $40bn by 2020, and with the right support from Government and other
stakeholders, can impact the engineering sector as a whole.
The Government has been instrumental in the growth of the Engineering sector:
5.2
Tariff protection on capital goods has been withdrawn. This has reduced custom duties on a
range of engineering equipments.
Initiatives like Power for all by 2012, capacity addition plans in the 12th Five Year Plan and
infrastructure projects such as Golden Quadrilateral and the North-South and East-West
corridors have fuelled growth in the sector.
Government has granted significant number of SEZs for the engineering sector across the
country.
FDI Policy
The initiatives of the government towards FDI have also served as a catalyst to further raise the
demand for engineering goods and machinery.
FDI inflows: Apr 2000-Aug 2013
Engineering
industry
attracts
around 35% of the total FDI
through an automatic route,
Removal of tariff protection on
capital goods, de-licensing of heavy
electrical industry and allowance of
100%
FDI,
infrastructure
development and reduction of
custom
duties
on
various
equipments are some of the
initiatives by the government,
which have positively impacted the
engineering sector.
Particulars
Electrical equipment
Miscellaneous mechanical and
engineering
Industrial machinery
Non-conventional energy
Machine tools
Medical and surgical appliances
Agricultural machinery
Earth-moving machinery
Railway related components
Industrial instruments
Scientific instruments
Boilers and steam generating plants
150.13
114.73
3,242.14
2,483.98
122.95
141.28
31.65
35.73
16.60
8.64
17.93
3.10
5.42
3.06
2,519.45
2,801.02
655.68
717.61
337.35
190.05
366.29
67.06
102.78
62.00
Page 12 of 13
6. FUTURE OUTLOOK
The engineering sector is expected to grow in the future and has a positive outlook owing to
infrastructure development, favourable government policies, and new investments in power projects,
metals, oil & gas, and petrochemicals industries. Further industrial and manufacturing growth will
boost growth in the engineering sector. As the export market offers more opportunities to explore,
Indias contribution in global engineering exports is expected to increase. Emerging trends like
outsourcing of engineering services provide opportunities for growth. Engineering and design
services such as new product designing, product improvement, maintenance and designing
manufacturing systems are getting increasingly outsourced to Asian countries like India. It is
estimated that by 2020 India can be a US$ 40 billion market for engineering outsourcing services. In
addition, Department of Commerce has set a target of US$ 125 billion for engineering exports in
2013-14. Thereafter, for the remaining three years of the 12th Five Year Plan, based on a CAGR of
20% for the major sectors of engineering exports except Industrial Machinery, Electrical Machinery,
and Shipbuilding, the overall export target for engineering exports at the end of the 12th Five Year
Plan has been set at US$ 222 bn. Thus, there are many opportunities for the Indian engineering
sector
Page 13 of 13