PRODESK ENGINEERING MANPOWER SOLUTIONS

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 a 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 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.

In FY21, India’s heavy electrical equipment production stood at Rs. 168,949 crore (US$ 21.15 billion). The electrical equipment market is forecasted to grow at 12% CAGR to reach US$ 72 billion by 2025 from US$ 48-50 billion in 2021. The electrical equipment export market is forecasted to reach US$ 13 billion by 2025, from US$ 8.62 billion in 2021.

Indian machine tool production and consumption were estimated at Rs. 6,602 crore (US$ 879.38 million) and Rs. 12,036 crore (US$ 1.6 billion), respectively, in FY21, while exports stood at Rs. 531 crore (US$ 66.48 million).

The boiler industry’s market size stood at US$ 146 million in 2019 and is expected to grow at a CAGR of 6% to reach US$ 194 million by 2025. Export of boilers stood at US$ 106.53 million between April-November 2020, with around 72 million units exported.

The market size of high voltage switchgear (including panels) and low voltage switchgear (including panels) stood at Rs. 4,793 crore (US$ 679.95 million).

In FY22, India exported engineering goods worth US$ 111.63 billion, a 45.51% increase YoY. India exports engineering goods mostly to US and Europe, which account for over 60% of the total exports.

FDI inflow for miscellaneous mechanical and engineering industries stood at US$ 4.14 billion between April 2000-June 2022 according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

In the recent past, there have been many major investments and developments in the Indian engineering and design sector:

• In October 2022, exports of engineering goods from India stood at US$ 7.4 billion.
• In October 2022, the total production of passenger vehicles*, three wheelers, two wheelers, and quadricycles was 2,191,090 units.
• In FY21, production of boilers stood at Rs. 6,728.36 crore (US$ 842.35 million).
• Exports of auto components stood at Rs. 1.41 lakh crore (US$ 19 billion) in FY22.
• With 100% FDI allowed through the automatic route, major international players such as Cummins, GE, ABB and Alfa Laval have entered the Indian engineering sector due to growth opportunities.
• In February 2022, Microsoft India and Larsen & Toubro (L&T) signed a Memorandum of Understanding (MoU) to build a regulated sector cloud product. The two businesses will collaborate with a select group of significant customers in regulated industries to design architectures and roadmaps to help them achieve their digital transformation goals and transition traditional datacenters to hybrid cloud architecture.
• In September 2021, Bharat Fritz Werner India, a leading machine tool manufacturer in the subcontinent, announced that it is entering the metal additive manufacturing area.
• In September 2021, Larsen & Toubro (L&T) announced that it will participate in the Expo 2020, Dubai to be held from October 5, 2021, to March 31, 2022, as part of the Indian pavilion. L&T plans to demonstrate its capabilities in hydrocarbon engineering, and businesses such as water-effluent treatment, power transmission and distribution.
• In August 2021, Bharat Heavy Electricals secured its largest-ever order worth Rs. 10,800 crore (US$ 1.45 billion) from the Nuclear Power Corporation of India Limited (NPCIL) for the EPC of a turbine island for 6 units of 700 MW.
• The Auto Component Manufacturers Association (ACMA) expects auto component revenue to increase by 20-30% in the next fiscal year due to demand from OEMs and increase in export. The association expects the Indian auto component export to grow up to US$ 30 billion over the next five years.
• In May 2021, TVS Motor Company announced that it sold one lakh units of its ‘NTORQ 125’ scooter in the international market.
• In April 2021, Tata Power, in collaboration with Hitachi ABB Power Grids and Cargill, commissioned India’s largest natural ester-filled 110/33/22 kV, 125 MVA power transformer in the Mumbai Transmission network at the Bandra-Kurla Complex receiving station.
• In March 2021, Hitachi ABB Power Grids Ltd. bagged an order worth Rs. 160 crore (US$ 21.66 million) to supply transformers to the Indian Railways.
• In January 2021, Tesla, the electric car maker, set up a R&D centre in Bengaluru and registered its subsidiary as Tesla India Motors and Energy Private Limited.

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.

• In November 2022, Engineering Export Promotion Council of India (EEPC) stated that the government’s decision to withdraw the 15% export duty imposed on iron ore and steel products would boost engineering goods exports from the country.
• The All India Council for Technical Education (AICTE) has launched educational books for diploma and under-graduate engineering courses in Marathi language so that students can learn better in their native language.
• The AICTE has entered into collaborations with the MSME ministry, NHAI and DM offices in 150 districts to facilitate engineering internships for students.
• In the Union Budget 2022-23, the government has given a massive push to the infrastructure sector by allocating Rs. 199,107 crore (US$ 26.52 billion) to enhance the transport infrastructure.
• Prime Minister Mr. Narendra Modi, on the country's 75th Independence Day, announced plans to invest Rs. 100 trillion (US$ 1.35 trillion) in infrastructure to stimulate economic development and generate employment.
• In October 2021, the Department of Telecommunications (DoT) approved 31 proposals totaling an investment of US$ 447 million over the next 4.5 years, as part of the PLI scheme for telecom and networking products manufactured in India.
• In October 2021, the Ministry of Textiles allowed pilot projects for application of geo-textiles in infrastructure projects.
• In September 2021, the government announced its PLI scheme of Rs. 10,683 crore (US$ 1.4 billion) for textiles, specifically aimed at boosting production of man-made fibre (MMF) fabric, MMF apparel and technical textiles.
• In September 2021, the Indian government announced a PLI scheme for automobiles and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This scheme is expected to bring investments of Rs. 42,500 (US$ 5.74 billion) by 2026.
• In August 2021, Prime Minister Mr. Narendra Modi launched the Voluntary Vehicle-Fleet Modernisation Program (VVMP), also known as the Vehicle Scrapping Policy. The policy will bring in investments worth Rs. 10,000 crore (US$ 1.35 billion) to set up 450-500 Automated Testing Stations (ATS) and 60-70 Registered Vehicle Scrapping Facilities (RVSF) across the country. A single window clearance portal is being developed where applications for ATS and RVSF will be catered through a single portal within 60 days.
• The government is taking several steps to boost domestic defence manufacturing. In line with this, between FY17-22 (until June 2021), the Indian government signed 264 contracts for defence equipment procurement, with 159 contracts for armed forces equipment procurement.
• In April 2021, Under the Development cum Production Partner (DcPP) programme, Defence Research and Development Organisation (DRDO) allowed private sector firms to develop and produce missile systems, such as vertical launched surface and air missile system programmes, to promote the domestic defence industry.
• The Indian telecom equipment market is likely to increase owing to the government’s Rs. 12,195 crore (US$ 1.6 billion) PLI scheme approved for telecom gear manufacturing in February 2021.

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.

India’s earthmoving and construction equipment (ECE) industry has enjoyed strong growth over the last seven years due to rapid economic development, and it has become the third largest construction equipment market in the world. In FY22, the construction equipment industry sold 85,385 units, while the earthmoving sector continues to grow. With development of infrastructure, demand for construction equipment and other machinery is expected to rise significantly.

The material handling equipment sector is expected to gain from robust demand from steel, power, mineral and other infrastructure industries, while demand for machine tools from the capital goods sector (especially automobile and textile industries) is projected to remain high.

The ‘Make in India’ initiative and the government's focus on ease of doing business is likely to present several opportunities in the engineering and capital goods sector in the upcoming years.