Industry Analysis  - ( 15/12/2024 To 21/12/2024  )

Engineering Industry in India

Introduction

India’s Capital Goods manufacturing industry serves as a strong base for its engagement across sectors such as Engineering, Construction, Infrastructure and Consumer goods, amongst others.

The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Demand for engineering sector services is being driven by capacity expansion in industries like infrastructure, electricity, mining, oil and gas, refinery, steel, automobiles, and consumer durables. India has a competitive advantage in terms of manufacturing costs, market knowledge, technology, and innovation in various engineering sub-sectors. India’s engineering sector has witnessed remarkable growth over the last few years, driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of huge strategic importance to India’s economy.

The development of the engineering sector of the economy is also significantly aided by the policies and initiatives of the Indian government. The engineering industry has been de-licensed and allows 100% foreign direct investment (FDI). Additionally, it has grown to be the biggest contributor to the nation's overall merchandise exports. India became a permanent member of the Washington Accord (WA) in June 2014. it is now part of an exclusive group of 17 countries that are permanent signatories of the WA, an elite international agreement on engineering studies and the mobility of engineers.

Market Size

The Capital Goods sector contributes to 12% of India’s manufacturing output and 1.8% of GDP. Market valuation of the capital goods industry was US$ 43.2 billion in FY22.

Imports of Electrical Machinery in India increased to US$ 12.30 billion in FY24. The Indian electrical equipment industry comprises of two broad segments, Generation equipment (boilers, turbines, generators) and Transmission & Distribution (T&D) and allied equipment like transformers, cables, transmission lines, etc. The sector contributes about 8% to the manufacturing sector in terms of value, and 1.5% to overall GDP. Incentives for capacity addition in power generation will further increase the demand for electrical machinery.

The quick estimates of Index of Industrial Production (IIP) for FY24 came at 156.2, improving from 146.7 in FY23.

The electrical equipment market share in India is expected to increase from US$ 52.98 billion in 2022 to US$ 125 billion by 2027, implying a robust CAGR of 11.68%. The domestic electrical equipment market is expected to grow at an annual rate of 12% to reach US$ 72 billion by 2025. In FY23, India’s heavy electrical equipment production stood at Rs. 2,44,300 crore (US$ 29.38 billion). The electrical machinery segment grew nearly 13% with shipments jumping to US$ 10.19 billion in the April-December 2023 from US$ 9.06 billion in the year-ago period. The Indian textile machinery industry was expected to touch the US$ 6 billion mark by 2022. India’s textile machinery exports declined by 5.09% to US$ 1003.55 million in 2023 compared to the previous year.

  • The market size of the Plastic machinery sector stood at US$ 0.5 billion.
  • Indian Process Plant and Machinery (PPM) industry has estimated capacity of US$ 6.00 Billion per annum
  • Earthmoving equipment sales grew by 23% YoY in second quarter of FY 2024, as the total equipment numbers sold increased to 22,334.
  • Foundry industry has a turnover of approx. US$ 20 billion with exports of approx. US$ 3.54 billion.
  • There are 750–800 domestic Medical Devices manufacturers in India, with an average investment of US$ 2.3–2.7 million and an average turnover of US$ 6.2-6.9 million.
  • The Indian industrial fasteners market was valued at US$ 9,064 million in 2022 and is projected to reach US$ 17,868 million by 2030, registering a CAGR of 7.9% during the forecast period (2023-2030).
  • India steam boiler systems market size is expected to reach nearly US$ 22.56 billion by 2027 with the CAGR of 4.63% during the forecast period.
  • The India generator sets market is expected to grow at a CAGR of more than 5% over the period of 2020-2025.
  • The India power transformer market is expected to rise at a CAGR of more than 3% during the forecast period of 2020-25.
  • India switchgear market size was estimated at US$ 9.75 million in 2022 and is expected to grow at CAGR of 7.12% reaching a value of US$ 18.23 million by 2029.
  • India’s automotive industry is worth more than US$ 222 billion, contributes 8% of the country’s total export, accounts for 7.1% of India's GDP and is set to become the 3rd largest in the world by 2030.
  • Indian auto components industry, which accounts for 2.3% of India’s GDP currently, is set to become the 3rd largest globally by 2025. According to the Automotive Component Manufacturers Association of India, the auto-components industry of India is expected to grow by 10-15% in FY24, which would be driven by both domestic and export market demand.
  • The Indian agricultural equipment market has reached a value US$ 10.25 billion in 2023 and is anticipated to grow at a CAGR of 5.24% through 2029.
  • The Indian machine tool market size reached US$ 1.5 billion in 2023 and is expected to reach US$ 3.2 billion by 2032, exhibiting a growth rate (CAGR) of 8.2% during 2024-32.
  • The Indian automated material handling (AMH) market was valued at US$ 1,353.8 million in 2020 and is expected to go up to US$ 2,739.34 million by 2026 at a CAGR of 12.7%.
  • In FY23, India’s heavy electrical equipment production stood at Rs. 2,44,300 crore (US$ 29.38 billion).
  • The boiler market in India is expected to grow from Rs. 5,859 crore (US$ 704.6 million) in FY19 to Rs. 8,831 crore (US$ 1.1 billion) in FY30 with an expected CAGR of 3.8%.
  • In FY24, exports of engineering goods stood at US$ 109.32 billion, reflecting a marginal growth of 2.1% of YoY growth. In April 2024, exports of engineering goods reached at US$ 8.67 billion.
  • In FY24, exports of engineering goods stood at US$ 109.32 billion, reflecting a marginal growth of 2.1% of YoY growth. India exports engineering goods mostly to the US and Europe.

Investments

  • FDI inflow for miscellaneous mechanical and engineering industries stood at US$ 4.50 billion between April 2000-March 2024.
  • Engineering accounts for about 25% of India’s total global exports in the goods sector and is one of the largest foreign exchange earners.
  • In FY23, the exports of engineering goods from India have been estimated to stand at US$ 107.04 billion.
  • In FY24, exports of engineering goods stood at US$ 109.32 billion, reflecting a marginal growth of 2.1% of YoY growth. In April 2024, exports of engineering goods reached at US$ 8.67 billion.
  • India's engineering goods are exported to key markets such as the US, Europe, and UAE
  • The value of shipments to the US, the top market for India's engineering goods, stood at US$ 17.63 billion in FY24.
  • Export of engineering goods is expected to reach US$ 200 billion by 2030.
  • In October 2023, the Automotive Research Association of India (ARAI) signed an agreement with IIT Guwahati to set up a common engineering facility centre titled ‘Digital Twin Centre for Emerging Automotive Systems’ in a hub and spoke model.
  • In July 2023, Bharat Heavy Electricals Limited (BHEL) signed a Technical Assistance and License Agreement with General Electric Technology GmbH Switzerland for Gas Turbines. 
  • Creation of a significant number of special economic zones (SEZs) across the country has been approved.
  • The development of Delhi Mumbai Industrial Corridor (DMIC) across seven states will further bolster the engineering sector.
  • Reliance Defence and Engineering Ltd 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.
  • American plane maker Boeing Corporation has launched the Boeing India Engineering & Technology Centre in Bengaluru.
  • In November 2022, L&T Infotech and Mindtree merged to make India's 5th-largest IT company, LTIMindtree, that will help businesses proactively take on and shape the future by harnessing the full power of digital technologies.
  • In January 2023, Bharat Heavy Electricals Ltd (BHEL) bagged the order for renovation and modernization of 200 MW Unit-3 and 210 MW Unit-5 steam turbines at Ukai thermal power station 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% 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.

  • Under Union budget 2024-25, the defence sector was allocated a budget of Rs. 6.21 lakh crore (US$ 74.62 billion).
  • In Budget 2024-25, Government has committed an outlay of Rs. 11.11 lakh crore (US$ 133.5 billion) this year towards infrastructure capital expenditure.
  • MHI is implementing the Scheme for ‘Enhancement of Competitiveness in the Indian Capital Goods Sector Phase 2’ in order to facilitate adoption of Industry 4.0 and to promote investments in manufacturing sector, indigenization of technologies and creation / augmentation of common service infrastructure / Testing facilities. Rs. 250 crores have been allocated under this Scheme for Financial Year 2023-24.
  • The Ministry of Heavy Industries (MHI) launched two Production Linked Incentive (PLI) Schemes, namely PLI Scheme for Automobile and Auto Component Industry, and PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage. The PLI Scheme for the automobile and auto components industry has been launched with a total budgetary outlay of Rs. 25,938 crore (US$ 3.17 billion) for a period of five years (FY23 to FY27).
  • To increase the employability of engineering graduates in the country, AICTE (All India council of technical education) leadership is taking a lot of efforts and recommends model curriculum for engineering programs like AI, IoT, Robotics, Block chain, Machine learning, Data Science and Cyber security.

Road Ahead

The electrical equipment market share in India is expected to increase by US$ 33.74 billion from 2021 to 2025, and the market's growth momentum will accelerate at a CAGR of 9%. Investment in engineering R&D sector is expected to reach US$ 63 billion by 2025. Market size for the Indian Construction Equipment Market stood at US$ 7.2 billion in FY23 and is forecasted to grow at a CAGR of 15% for next five years, as per the estimates of CII. The construction equipment industry is expected to sell 165,097 units by 2028. The machine tools market is expected to reach US$ 2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28. India’s expected export of medical devices will reach ~ US$ 10 billion by 2025.

  • India steam boiler systems market size is expected to reach nearly US$ 22.56 billion by 2027 with the CAGR of 4.63% during the forecast period.
  • The India generator sets market is expected to grow at a CAGR of more than 5% over the period of 2020-25.
  • The India power transformer market is expected to rise at a CAGR of more than 3% during the forecast period of 2020-2025.
  • Indian auto components industry, which accounts for 2.3% of India’s GDP currently, is set to become the 3rd largest globally by 2025.
  • Export of engineering goods is expected to reach US$ 200 billion by 2030.
  • India plans to spend US$ 1.4 trillion on infrastructure between 2019-2023 which is predicted to boost the expansive growth of the sector.
  • The India diesel gensets (generator sets) market is expected to reach US$ 2.78 billion by 2030 compared to US$ 1.48 billion by 2022 at a CAGR of 8.20%. 
  • India will become a major exporter of telecom equipment in the next two to three years and the government is working to achieve that goal.
  • The Ministry of Road Transport and Highways plans to construct around 13,814 km of national highway construction in FY 2024 and a network to two lakh km by 2025.
  • India’s installed nuclear power capacity of 6,780 MW will increase to 22,480 MW by 2031 on progressive completion of projects under construction and accorded sanction.
  • The Indian automated material handling (AMH) market was valued at US$ 1353.8 million in 2020 and is expected to go up to US$ 2,739.34 million by 2026 at a CAGR of 12.7%.
  • Turnover of the capital goods industry was estimated at US$ 92 billion in 2019 and is forecast to reach US$ 115.17 billion by 2025. India’s engineering R&D market will increase from US$ 36 billion in FY19 to US$ 63 billion by FY25. The export of engineering goods is expected to reach US$ 200 billion by 2030.
  

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