Beruflich Dokumente
Kultur Dokumente
BRIEF REPORT
ON
ENGINEERING SECTOR IN INDIA
September 2012
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 engineering sector is the largest sector among the industrial segments in India and provides
direct and indirect employment to over 4 million skilled and non-skilled workers. This industry
basically comprises of heavy and light engineering segments. This is further subcategorized into
machinery/capital goods, equipments, and transport equipment in heavy engineering, castings,
forgings to sophisticated process control equipment in the light engineering segment. Machine tools
form a part of the capital goods segment.
ENGINEERINGSECTOR
HEAVY
ENGINEERING
LIGHT
ENGINEERING
Transport
Equipment
Capital
Equipment
Other
Machinery
Equipment
Lowtech
Itemslike
Forging,
Casting&
Fastener
Highly
Sophisticated
microprocessor
basedprocess
control
equipment,
diagnostic
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IndustrialMajors
(Refining
Automotive
textile)
Indian
Engineering
Sector
PowerUtilities
(Generation,
transmission,&
Distribution
Government
(Public
Investment)
Retail
Consumer
(Pumps&
Motors)
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
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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
PerformanceofEngineeringGoodsinIndiasExports
Particulars
Sharesintotalexport GrowthRate(%)
AprilSeptember
AprilSeptember
201011
2011
2010
2011
12
11
12
EngineeringGoods 21.7
22.2
84
43.6
Machinery
13.1
13.1
55.7
40.2
a)Machinetools
0.1
0.1
12.8
18.3
b)Machinery&
4.9
4.6
25.2
31.6
instrument
c)Transport
8.1
8.4
86.6
45.7
equipments
of 2012 respectively. This was mainly due to faster growth of two
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major items machinery & instruments and transport equipments besides residual engineering items
with very high growth rates. The share of engineering goods exports to total exports have increased
from 11.9% in 1999-2000 to 23.8% in 2011.
2.3
Major markets
Major markets for Indian engineering exports in 2011 were China, the US, the UAE, Singapore,
Saudi Arabia, South Africa, Germany, Sri Lanka, and the UK. Engineering goods are one of the
items that have driven growth in exports of the country in 2012. The resilience in export
performance of India has resulted from a supportive government policy, focusing on diversification
in terms of higher value-added products in the engineering and petroleum sectors and destinations
across developing economies.
Heavy engineering and machine tools sector mainly consist of capital goods industry. The capital
goods industry contributes 12% to the total manufacturing activity, which is 16% of GDP and it
provides critical input; machinery and equipment; to the remaining sector. Manufacturing thus forms
the key end-user sector of capital goods and further drives the performance of the industry. Capital
goods sector registered a growth of 7.6% during Apr-July 2011-12 as compared to 23.1% during the
corresponding period of 2011. The upsurge in industrial growth, coupled with governments
emphasis on infrastructure developments has augured well for the capital goods industry.
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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
Sales Turnover
during 2010-11
Rs.433.79 billion
14 manufacturing
divisions, four
power sector
centers, over 100
project sites, eight
service
centers and 18
regional offices.
Hindustan
Aeronautics
Ltd
Public sector
enterprise
Sales Turnover
during 2010-11
Rs. 130.61 billion
Siemens Ltd
Flagship of the
Sales Turnover
Siemens Group in during 2010-11
India. Siemens AG, Rs. 114.80 billion
the parent
company holds
54.63 percent in
Siemens Ltd
Caters to power
generation and
transmission,
transportation
(especially
railways),
telecom,
renewable energy
& industry at
large.
Supplies/ services
are mainly to
Indian defence
services, Coast
Guard and
Border Security
Force. Transport
aircraft and
helicopters have
also been
supplied to
airlines as well as
state
governments of
India.
Power generation
and
Distribution
equipment,
industrial projects
and equipment,
transportation
systems,
communication
and healthcare
products
Crompton
Greaves
Part of the
Avantha Group
Largest private
sector enterprise
in the business of
Facilities are
located at
Bhind, Mumbai,
BHEL
Sales turnover
during 2010-11
Rs.101.05 billion
Facilities are
located
throughout India
including
Nashik, Korba,
Kanpur,
Koraput,
Lucknow and
Hyderabad.
Has plants at
Aurangabad,
Nashik, Goa,
Thane and
North 24
Parganas (West
Bengal)
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Larsen &
Toubro Ltd
(L&T)
Sale turnover
during 2010-11
Rs. 530.08 billion
electrical
engineering
Nashik, Hosur,
Goa
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.
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4. SWOT ANALYSIS
Engineering Sector SWOT Analysis
Strengths
x
x
x
x
x
x
Opportunity
x
x
x
Weakness
x
x
x
x
x
x
x
x
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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 $40bn by 2020, and with the right support from Government and other
stakeholders, can impact the engineering sector as a whole.
The Government has been instrumental in the growth of the Engineering sector:
x
x
5.2
Tariff protection on capital goods has been withdrawn. This has reduced custom duties on a
range of engineering equipments.
Initiatives like Power for all by 2012, capacity addition plans in the 12th Five Year Plan and
infrastructure projects such as Golden Quadrilateral and the North-South and East-West
corridors have fuelled growth in the sector.
Government has granted significant number of SEZs for the engineering sector across the
country.
FDI Policy
The initiatives of the government towards FDI have also served as a catalyst to further raise the
demand for engineering goods and machinery.
FDI inflows: Apr 2000-Jan 2012
Engineering
industry
attracts
around 36% of the total FDI
through an automatic route, subject
to a limit of US$ 2 million of lump
sum payments. Removal of tariff
protection on capital goods, delicensing 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
844.75
180.26
75.91 1
61.42 1
19.51
24.21
9.04
7.29
10.58
3.04
0.97
2.02
664.26
324.22
428.94
514.08
200.32
167.33
234.76
65.95
21.21
41.77
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6. FUTURE OUTLOOK
The engineering sector is expected to grow in the future and has a positive outlook owing to
infrastructure development, favorable 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
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