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Analysis_of_engineering[1]
- 1. SUBMITTED BY :- RATAN PREET KAUR
- 2. Overview Sub-Sectors Key Growth Drivers Key Concern Cumulative FDI Inflows (US $ billion) Export Performance Of Principle Commodities Market Size , Investments Government Initiative Road Ahead
- 3. The Indian engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The 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.
- 5. The engineering sector in India has been growing on the back of growth in the user industries and several new projects being undertaken in various core industries such as railways, power, infrastructure, etc. Capacity creation in sectors such as infrastructure, oil & gas, power, mining, automobiles, auto components, steel, refinery, consumer durables, etc, is driving growth of the engineering industry. • Growth of the key user-industries • Government’s thrust on the power and construction industries • India being preferred by global companies as an outsourcing destination as it enjoys lower labour cost and better designing capabilities
- 6. Barriers to entry Barriers to entry are high at upper end of the industry as skilled manpower and technologies as well as ability to execute large projects are a prerequisite in engineering sector. However, in few construction businesses like road business, which are not very technologically inclined, the company's expertise in execution is the key differentiator. Bargaining power of customers Bargaining power for technology driven and highly skilled segments is low. However, fierce competition has increased bargaining power of customers in power generation.
- 7. • Cumulative FDI inflows increased to US$ 26.3 billion in FY16* from US$ 8.9 billion in FY10. • The government’s increasing focus on attracting foreign investors in manufacturing and infrastructure is likely to boost FDI in the sector. • FDI inflows includes Automobile industry, Electrical equipment, Miscellaneous mechanical and engineering industry, Industrial machinery, Machine tools, Agriculture machinery, Earth-moving machinery and Industrial instrument.
- 9. Key categories of engineering exports: • Transport equipment (which includes Auto & auto component including Aircraft and ship boats) is the leading contributor to engineering exports accounting for 34.5 per cent of the total engineering exports in FY 15. • Iron & Steel and products made of Iron & Steel have accounted around 22.9 per cent market share while industrial machinery including electrical machinery accounted 21.9 per cent of the total engineering exports in FY15. • Others commodities includes Medical and Scientific instruments, Hand tools & Cutting tools, Bicycle parts, Office equipments , Prime Mica & Mica Products etc. accounted 8.7 per cent of the total engineering exports in FY15.
- 11. • The capital goods and engineering turnover in India is expected to reach 125.4 billion USD by the fiscal year 2017. • Engineering exports from India in the fiscal year 2014-15 stood at 70.7 billion USD registering a growth of 14.6 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise. • 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.
- 12. • 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 June 2015 stood at around 4,053.72 million USD, as per data released by the Department of Industries Policy and Promotion (DIPP).
- 13. • In the recent past there have been many major investments and developments in the Indian engineering and design sector:- • Toshiba Transmission and Distribution Systems (India) Pvt Ltd has bagged Rs 226 crore (US$ 33.46 million) contract from Kenya Power and Lighting Company for around 8,000 distribution transformers. • L&T Hydrocarbon Engineering (LTHE), a subsidiary of Larsen & Toubro, has bagged an onshore EPC contract of over Rs 650 crore (US$ 96.25 million) from Gujarat State Fertilisers and Chemicals (GSFC) for setting up 40,000 million tonnes per annum (mtpa) Melamine Plant at Fertiliser Nagar, Vadodara. • Vistara, the Tata Sons-Singapore Airlines JV, signed an agreement with Airbus for engineering support services which include components supply and airframe maintenance
- 14. • The sector has been de-licensed and enjoys 100 per cent FDI. • The government has also taken steps to improve the quality of technical education in the engineering sector by allocating a sum of Rs 500 crore (US$ 75.33 million) for setting up five more IITs in the states of Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala. • Steps have also been taken to encourage companies to perform and grow better. For instance, EIL was recently conferred the Navaratna status after it fulfilled the criteria set by the Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises, Government of India.
- 15. • Prime Minister, Mr Narendra Modi announced a partnership between Bloomberg Philanthropies and the Ministry of Urban Development, Government of India, to advance the "Smart Cities Initiative." • The Smart Cities Initiative is a historic effort to promote economic growth, improve governance, and deliver more effective and efficient public services to India's urban residents. • Government of India has also taken initiatives to provide a level playing field to domestic and foreign private players bidding for the government contracts in defence sector.
- 16. • The engineering sector is a growing market. Spending on engineering services is projected to increase to 1.1 trillion USD by 2020. With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected to touch 120 billion USD by 2015. • Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a reality.