Engineering Industry in India
Latest update: October, 2017
- Engineering exports from India stood at US$ 65.23 billion in FY17
- During FY08–FY17, engineering exports from India registered growth at a CAGR of 7.61 per cent
- Engineering exports include transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners
- In August 2016, engineering exports by India, to its top 25 destinations, registered a growth of 5.8 per cent over August 2015
- With the revival of demand for iron and steel in China and the US, India’s engineering exports reached US$58.8 billion in FY16.
- During the fiscal year 2016-17, the exports have touched US$65.23 billion, which exceeds the total shipments of US$58.8 billion in 2015-16.
Note: FY - Indian Financial Year (April to March)
![Robust growth in India's Engineering exports over the years](https://www.ibef.org/uploads/industry/Engineering1-sep-2017.jpg?1509618968683)
Last Updated: October, 2017
Introduction
The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy.
India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world.
India became a permanent member of the Washington Accord (WA) in June 2014. The country is now a part of an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers.
Market size
The capital goods & engineering turnover in India is expected to reach US$ 125.4 billion by FY17.
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. Sri Lanka, Nepal and Bangladesh have also emerged as the major destinations for India's engineering exports.
According to data from the Engineering Export Promotion Council of India, engineering exports from India grew 11.33 per cent year-on-year to reach US$ 65.23 billion in FY 2016-17.
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 March 2017 stood at around US$ 3.31 billion, as per data released by the Department of Industries Policy and Promotion (DIPP).
In the recent past there have been many major investments and developments in the Indian engineering and design sector:
- Larsen and Toubro Ltd (L&T) has been awarded with projects worth Rs 2,170 crore (US$ 336.93 million), which includes an order worth Rs 1,169 crore (US$ 181.51 million) from Oman Electricity Transmission Company SAOC.
- Warburg Pincus is in advance talks with Tata Technologies to acquire up to 40 per cent minority stake for about Rs 2,300 crore (US$ 357.11 million).
- Engineers India Ltd and Gazprom PJSC, the respective domestic companies of India and Russia in the engineering and oil and gas sectors, will prepare a blueprint for laying a gas pipeline between India and Russia, which is expected to help India diversify its energy mix and increase trade with Russia.
- Hexagon Capability Centre India (HCCI) in collaboration with National Institute of Technology Karnataka (NITK), Surathkal, launched first-of-its-kind NextGen 3D Lab costing Rs 7.7 crore (US$ 1.15 million) at NITK Campus. The lab aims at making budding engineers industry-ready by the time they graduate.
- Engineering and construction major L&T entered into a joint venture with European defence major Matra BAE Dynamics Alenia (MBDA) Missile Systems for development of missiles in India. L&T will own 51 per cent stake in the JV named L&T MBDA Missile Systems and the rest 49 with the European partner.
- American plane maker Boeing Corporation has launched the Boeing India Engineering & Technology Center in Bengaluru. The centre will employ hundreds of locals who will work to support Boeing, including its information technology & data analytics, engineering, research and technology, and tests.
- Reliance Defence and Engineering Ltd said it has signed an agreement with the US Navy for undertaking service, maintenance and repair of Seventh Fleet of US Navy at the Reliance Shipyard at Pipavav in Gujarat.
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.
- The Government of India is planning to merge 6 engineering consulting Public Sector Units (PSUs) to create a mega consultancy firm that can take up projects across sectors and compete with the likes of Bechtel of the US and domestic majors like Larsen & Toubro (L&T).
Road Ahead
The engineering sector is a growing market. Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020.
Exchange Rate Used: INR 1 = INR 1 = US$ 0.0155 as of April 17, 2017.
References: Media reports, Press releases, EEPC India, Press Information Bureau (PIB), Department of Industrial Policy and Promotion (DIPP), The Confederation of Indian Industry(CII)
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