The engineering sector

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The engineering sector

• It is the largest segment of the overall Indian
  industrial sector.
• The engineering sector employs over 4 million
  skilled and semi-skilled workers (direct and
  indirect).
• The engineering industry accounts for 12 per cent
  of Indias GDP.
• Engineering goods enjoy 30.5 per cent weight in
  the Index of Industrial Production (IIP) 29.9
  per cent share of total investment and 62.8 per
  cent share in foreign collaborations.
• Engineering exports accounts for over 20 of
  Indias total exports
• It is the largest foreign exchange earner for the
  country.

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The principal characteristics of the engineering
industry
Principal Characteristics by Major Engineering
Group in ASI 2004-05
NIC-04 Description Total Input Gross Output Depreciation Net Value Added
27 Basic metals 18746221 24480111 808820 4925070
34 Motor vehicles, trailers and semi-trailers 12302779 14345878 364101 1678997
29 Machinery and equipment 5673191 7218344 192792 1352361
35 Other transport equipments 3510072 4400557 99802 790683
31 Electrical machinery and apparatus 3424259 4313241 104989 783993
28 Fabricated metal products 3190239 3881993 88421 603333
36 Furniture other manufacturing 2802014 3226210 42489 381707
32 Radio, television and communication equipments 2607310 3096112 116398 372405
33 Medical, precision and optical instruments 690941 962201 29295 241966
30 Office, accounting and computing machinery 503605 653471 40777 109089
TOTAL ENGINEERING TOTAL ENGINEERING 53450634 66578122 1887889 11239610
Grand total for all industry groups Grand total for all industry groups 136294133 167256142 4971324 25990686
Engineering goods as percent of total Engineering goods as percent of total 39.21 39.8 37.97 43.24
Value Figures in Rs. Lakhs
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Factor endowment

• Among developing countries, India offers the best
  combination of low costs,
• availability and skills and capabilities of
  manpower for the engineering sector. In
• terms of availability and skills, India produces
  each year over
• 500 PhDs
• 200,000 engineers
• 300,000 non-engineering postgraduates
• 2,100,000 other graduates
• This way India ensures a steady supply of
  qualified manpower for the sector.

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Gujarat Engineering Industry at a glance

• Gujarat contributes to over 8 of Indias total
  engineering output.
• There are 300 units in large sector and over
  75000 units in small and medium enterprises (SME)
• It is a major production base for sponge iron,
  steel pipes and tubes, copper cathode,
  Electricals, switchgear, transformers and
  transmission line towers, heavy fabrication, ship
  building and auto components.
• Largest producer of sponge iron and SAW ERW
  pipes
• Important manufacturer of power generation
  plants, switchgears, transformers and
  transmission line towers

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About EEPC INDIA

• the Engineering Export Promotion Council (EEPC)
  was set up in 1955 under the sponsorship of
  Ministry of Commerce, Govt. of India, for export
  promotion of engineering goods, projects and
  services from India.
• Initially started with a few hundreds of
  engineering units as an small outfit, with a
  passage of time it has grown to be the largest
  Export Promotion Council having membership of
  nearly 12,000 from amongst large Corporate
  Houses, Star Trading Houses, Small Medium Scale
  Units (SME), Trading Houses, etc.
• Out of the total membership of the Council, 60
  constitutes the SMEs.

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Growing trend of engineering exports
The figure shows the growth of Indian engineering
goods exports to the world since 2003-04.
From 2003-04 to 2007-08 (Value in USD Billion)
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Transformation of Indian engineering goods
1956-57
2007-08
EEPC has been instrumental in transforming the
profile of Indian engineering exports as supplier
of low value items to capital goods, plant and
machinery, high-end engineering services, etc.
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Diversification of Indian engineering products

• During the nascent stage, Indian engineering
  exports were mainly confined to Asia and to a
• small extent to Africa. Over the years, the
  scenario has completely changed and as of date,
• about 43 of total engineering exports are made
  to developed countries. A table showing
• exports of 43 to developed countries out of
  total engineering exports is given below

Region 1956-57 2006-07
Europe 0 26
America 0 17
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Top 10 destinations of Indian engineering exports
Importing Country Cumulative Exports 2007-08 change over 2006-07
USA 4269.81 12.49
UAE 2669.13 39.42
Singapore 1460.18 31.48
UK 1340.72 18.14
Germany 1279.24 43.74
Italy 1255.16 2.56
Saudi Arabia 1236.62 13.64
China 962.72 -25.69
Belgium 917.63 0.1
Malaysia 747.64 106.74

• USA is the largest destination of Indian
  engineering exports
• Exports to China has decreased in the said
  period
• Growth of exports to Malaysia is outstanding

Source DGCIS
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Engineering exports and employment

• The trends in engineering exports and the
  employment generated due to engineering
• exports, both direct and indirect, that can be
  estimated since 2001-02 are as follows

Trends in Engineering Exports, Employment and
Total Employment due to exports (2001-02 to
2006- 07)
Year Engineering Exports (in Rs Crore) Employment due to Engineering Exports only (in numbers) Total Employment due to Exports (in numbers) Engineering exports employment as a percent of total employment due to exports (in )
2001-02 32082 618896 10747917 5.75
2002-03 41287 719910 13095510 5.49
2003-04 61380 993689 13391400 7.42
2004-05 79749 1187558 15972094 7.43
2005-06 90108 1244561 16280062 7.64
2006-07 122660 1550723 18921530 8.19
Source RIS Estimates and are EEPC estimates
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Engineering Process Outsourcing (EPO)

• An Engineering Process (EP) is defined as a
  complete engineering design cycle
• activity for a product or a service from the
  conceptualization stage till the pre-
• manufacturing stage including the development of
  the prototype. It also extends
• beyond the manufacturing stage this includes
  applications like
• Product life cycle management (PLM) solutions
• Product re-engineering solutions, etc.
• Engineering processes also entail design and RD
  activities across industry
• sectors like automotive, aerospace, telecom,
  utilities, etc.

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The EPO value chain

• Some of the major EPO services applications (in
  order of increasing engineering complexity) are

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Major regions outsourcing engineering processes

• On the basis of primary and secondary sources,
  the major countries outsourcing
• EPO services are
• North America (US)
• Western Europe (France, Germany, UK)
• Japan
• Emerging markets outsourcing engineering
  processes are
• Canada and Italy

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Major regions supplying engineering processes

• The major countries outsourcing engineering
  processes are
• Asia (India, China, Thailand, Taiwan,
  Philippines)
• Eastern Europe (Romania, Russia)
• North America (Mexico, Canada)
• The emerging economies from where EPO services
  are being outsourced
• Vietnam
• Brazil

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Estimation of Indian Engineering Process
Outsourcing

• The various parameters that were taken into
  consideration to estimate the global EPO
• market demand and Indias market potential for
  EPO are
• The current global EPO market is at 2-3 of the
  total global RD expenditure. This will continue
  to rise and is expected to reach to 4-5 by 2010
  and about 7-9 by 2015.
• This means that the global EPO market is poised
  to grow to 50 bn-70 bn by the year 2010 and
  110 bn-140 bn by 2015.
• The Indian market share for EPO will continue to
  rise from the 12 market share in the year 2004
  to reach about 15-18 by 2010. The Indian market
  share of the total global EPO industry can
  potentially command 18-22 by 2015.
• The Indian EPO market has the potential to assume
  a size of 25 bn-30 bn annually in the long term
  by the year 2015.

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Measures to augment Indias engineering industry
and exports

• Enhancing Global Competitiveness
• Indian Engineering Exports needs to gear up more
  to face ever increasing global competitiveness.
• China, Mexico, Hungary, Czechoslovakia and Korea
  have emerged as the growing Engineering export
  countries vis-a-vis India.
• Technological Issues
• Indian exporters need to invest more in terms of
  product design, specific features, performance
  and raw material substitutes.
• Move up the value chain with the help of better
  technologies such as precision measuring,
  material engineering and process control.

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Impact of global financial crisis

• Problems related to LCs
• Banks were hesitant to issuing letter of credit
  due to credit non availability in various
  countries.
• Problems related to liquidity (both domestic and
  external) to exporters
• most exporters have complained that they face
  tremendous problems with respect to
• credit requirements. The main complaints are
• Banks are hesitant to sanction limits and have
  increased interest rates
• Banks have suddenly refused to discount our Non
  LC-Inland bills at a time when festive season is
  on stating that they have exceeded their credit
  limits, event though this was not done earlier
  (Contd.)

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Impact of global financial crisis

• Banks are unwilling to roll over this buyers
  credit in foreign currency for import of machines
• Banks are not releasing pre shipment credit
  easily and there is problem in discounting
  foreign letter of credit documents even
  restricted ones.
• Issues related to existing export order and new
  orders
• Exporters have expressed concern over both export
  orders and new orders.
• One member has reported that their American buyer
  has stated that goods in US and EU are now
  cheaper than from India
• The frequency of orders have come down.

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Future outlook

• The engineering sectors future outlook is
  promising. Drivers like infrastructure
• development, industrial growth and favourable
  policy regulations will ensure
• growth in manufacturing.
• Emerging trends such as outsourcing of
  engineering services can provide new
  opportunities for quantum growth.
• Opportunities for Engineering Industry in the
  Defence and Civil Nuclear Energy Sector.
• The Council has proposed a Technology Upgradation
  Fund (TUF) Scheme for enhancing the technological
  capability of Indian engineering sector.
• The Council also appointed IIFT to carry out a
  detail study on China for the benefit of Indian
  engineering exporters.

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Scope in defence sector

• Initial steps in this regard has been taken with
  regard to the defence sector with India requiring
  foreign suppliers to match any bids they win with
  a sizable commitment to manufacture goods in
  India. In the case of the fighter jets, the
  winning bidder needs to promise to produce
  components here worth half the jets' price. Thus,
  many foreign companies are expected to enter with
  joint ventures with Indian companies.
• In addition to defence, India has important
  opportunities in civilian aviation, shipping and
  infrastructure, providing opportunities for the
  logistics and security units for many foreign
  companies.

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Scope in civil nuclear sector

• In the Civil Nuclear Sector, immense
  opportunities are likely to open up in the next
  two decades given the energy requirements of the
  country. Investments in this sector vary from USD
  40 billion to USD 80 billion.
• Thus, both these sectors are expected to create
  substantial investment opportunities for a range
  of engineering products that needs to be
  harnessed by the Indian engineering sector.

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Scopes in Space Research
Indias space commerce got a big boost when the
first satellite built by the Indian Space
Research Organisation (ISRO) for a foreign
customer was successfully put into orbit after
being launched by the European Ariane-5 rocket
fetching a profit of 40 million.
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To conclude.

• Indias engineering industrys progress is
  critical for the growth of the
• manufacturing sector, employment generation and
  indirectly tackling problems
• of poverty and inequality. Engineering sector too
  is a major employment
• generating sector and needs to be supported both
  by central and state
• authorities.

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Thank You