A plant for manufacturing engineering goods and capital goods is offered by Reliance MET in Jhajjar. The Haryana government has designated Reliance Industrial Plots Jhajjar as a Model Economic Township – Reliance MET.
Recent years have seen a remarkable increase in the growth of India’s engineering industry due to an increase in infrastructure development and industrial production. India’s engineering sector is closely associated with its manufacturing and infrastructure sectors, making it important to the economy.
The engineering sector in India has made substantial strides toward the country’s goal of becoming a global superpower. Engineers Export Promotion Council (EEPC) is the apex body of the Government of India responsible for promoting engineering goods, products, and services from India.
India exports transportation equipment, capital goods, other machinery/equipment, and light engineering products such as castings, forgings, and fasteners to a variety of countries worldwide. The Indian semiconductor industry has a high growth potential because industries that use semiconductors as inputs are in high demand.
In June 2014, India became a permanent member of the Washington Accord (WA). The country has now joined an elite group of 17 countries that are permanent signatories to the WA, an elite international agreement on engineering studies and engineer mobility.
Estimated market size
The capital goods industry is forecast to have a global turnover of US$ 115.17 billion by 2025, up from US$ 92.00 billion in 2019.
India exports engineering goods primarily to the United States and Europe, which account for more than 60% of total exports. Engineering exports totaled $75.90 billion in FY20 and will total $39.90 billion in FY21 (between April 2020 and October 2020). In FY20, the electrical equipment industry’s index of industrial production (IIP) was 105.5.
The engineering sector in India is attractive to foreign investors since it has a competitive advantage in terms of technology, manufacturing costs, and innovation. Several foreign players have invested in India due to the aforementioned factors, on top of the favorable regulatory environment and growth in the manufacturing sector.
In 2019, the United Nations Conference on Trade and Development (UNCTAD) reported that India was one of the top ten recipients of Foreign Direct Investment (FDI) in 2019, attracting US$ 49 billion in inflows, a 16 percent increase over the previous year, driving FDI growth in South Asia.
According to data released by the Department for Promotion of Industry and Internal Trade, FDI inflows into miscellaneous mechanical and engineering sectors totaled US$ 3,650.78 million between April 2000 and September 2020. (DPIIT).
There have been numerous major investments and developments in the Indian engineering and design sector in recent years:
- Daimler India (a commercial vehicle manufacturer) is focusing on network expansion in December 2020, having recently established ten new touchpoints. By 2022, the company intends to have at least 350 dealerships across India.
Larsen & Toubro (L&T) has received multiple orders to supply mining equipment to the coal, cement, and iron ore sectors in December 2020. The contract’s scope includes the supply of equipment as well as maintenance contracts to support operations for three to four years.
- Larsen & Toubro (L&T) has received multiple orders to supply mining equipment to the coal, cement, and iron ore sectors in December 2020.
- The state-run firm BHEL set a record by developing and testing India’s highest-rated transformer in November 2020. BHEL developed and tested the auto transformer at the National High Power Test Laboratory (NHPTL) in Madhya Pradesh.
- Mahindra Logistics Ltd., a supply chain management service provider, plans to open a ‘built-to-suit’ warehousing facility in Tamil Nadu in November 2020. This workspace would serve two key industries: e-commerce and automotive engineering. The facility’s primary goal is to provide integrated solutions to an e-commerce player and a German auto-component supplier.
- Samsung will establish an AR-VR Innovation Lab in collaboration with IIT-Jodhpur in November 2020. Samsung engineers will teach B.Tech, M.Tech, and Ph.D. students in collaboration with the faculty of the Department of Computer Science and Engineering (IIT-Jodhpur). In addition, other researchers will use the facility to conduct experiments. Each year, the laboratory will train up to 35 students.
Initiatives of the Government
Because of its intense integration with other industry segments, the Indian engineering sector is strategically important to the economy. The industry has been delicensed and receives 100 percent FDI. The government has reduced excise duties on factory gate tax, capital goods, consumer durables, and vehicles in order to boost the manufacturing sector:
- The Export Policy Uttar Pradesh 2020-25 aims to promote export growth and competitiveness by providing export subsidiaries with the necessary export-related assistance and services, as well as creating and improving technical and physical infrastructures to boost state-industry exports.
- To strengthen the capital goods (CG) sector, the government established a 22-member interministerial committee in November 2020 through initiatives that will assist this sector in effectively contributing to the national target of achieving a US$ 5 trillion economy and a US$ 1 trillion manufacturing sector.
In the Union Budget 2019-20, the government announced a Rs. 150,000 (US$ 2,250) income tax deduction on interest paid on loans for the purchase of electric vehicles.
- The Union Cabinet has approved incentives for investors worth up to Rs. 10,000 crore (US$ 1.47 billion) by amending the M-SIPS scheme in order to further incentivize investment in the electronics sector, create job opportunities, and reduce reliance on imports by 2020.
The government has authorised the ‘Production Incentive Scheme’ (PLI) for large-scale electronics manufacturing.
The Road Ahead
The capital goods industry’s turnover is expected to reach US$ 115.17 billion by 2025F. The engineering R&D market in India will grow from US$ 36 billion in FY19 to US$ 42 billion by FY22.
In the next decade, India will require Rs. 235 trillion (US$ 3.36 trillion) in infrastructure investment (2020 29).
Engineering goods exports are expected to reach $200 billion by 2030.