The engineering sector is the largest segment of the overall Indian industrial sector. India has a strong engineering and capital goods base.

The important groups within the engineering industry include machinery & instruments, primary and semi finished iron & steel, steel bars & rods, non-ferrous metals, electronic goods and project exports. The engineering sector employs over 4 million skilled and semi-skilled workers (direct and indirect).

The sector can be categorized into heavy engineering and light engineering segments. Heavy engineering segment forms the majority of the engineering sector in India. In the year 2003-04, out of the total engineering production of US$ 22 billion, the heavy engineering market contributed over 80 per cent with the light engineering segment accounting for the remaining.

India has a well-developed and diversified industrial machinery/ capital base capable of manufacturing the entire range of industrial machinery. The industry has also managed to successfully develop advanced manufacturing technology over the years. Among the developing countries, India is a major exporter of heavy and light engineering goods, producing a wide range of items. The bulk of capital goods required for power projects, fertilizer, cement, steel and petrochemical plants and mining equipment are made in India. The country also makes construction machinery, equipment for irrigation projects, diesel engines, tractors, transport vehicles, cotton textile and sugar mill machinery.

The performance of the engineering sector is linked to the performance of the end user industries for this sector. The user industries for engineering include power utilities, industrial majors (refining, automotive and textiles), government (public investment) and retail consumers (pumps and motors). The engineering sector has been growing, driven by growth in end user industries and the new projects being taken up in the power, railways, infrastructure development, private sector investment fields etc.

Many factors contribute to growth of engineering sector in India.

The key growth drivers are:

• The growth of the key end user sectors in India. For example, the domestic sales of automobiles have grown at the compounded annual growth rate of around 14 per cent over the past four year.

• Government’s emphasis on power and construction sector has increased for the past few years and thus increasing the demand for capital goods.

• Further, India is being preferred by global manufacturing companies as an outsourcing destination due to its lower labor cost and better designing capabilities. Engineering companies thus have a huge potential for direct exports and outsourcing.

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 over 500 PhDs, 200,000 engineers, 300,000 non-engineering postgraduates and 2,100,000 other graduates each year, thereby ensuring a steady supply of qualified manpower for the sector. In order to leverage India’s intrinsic technology strengths and the vast pool of highly qualified software professionals, ABB has set up a global corporate R&D center in Bangalore, which focuses on industrial IT development and deployment. It also helps maintain and support a range of software intensive products and partners with the ABB R&D centers as well as business areas within the group. This was the first such center to be established outside the US and Europe.

• The combination of ABB’s global know-how and India’s highly qualified people enables the Indian subsidiary to produce world-class products. The Indian subsidiary is a ‘global’ factory for high voltage 72.5 KV circuit breakers, medium voltage outdoor circuit breakers and magnetic actuators. It also exports several other products including transformers.

• The Indian engineering industry is highly competitive with a number of players in each segment. A large number of multinational companies such as Cummins, ABB and Alfa Laval have also entered the industry. The intense competition has led to Indian players developing improved capabilities that have made them more competitive.