InfomericsValuationAndRatingPvt.Ltd.

SEBIREGI
STERED /RBIACCREDI
TED /NSI
CEMP
ANEL
LED
CREDITRATI
NG AGENCY

Mr.
Vipi
nMali
k,

I
NDUSTRY OUTLOOK
(
Chair
man,
Inf
omer
icsRa
tings
)

Dr
.Manoranj
anShar
ma
(
Chi
efEconomis
t)
ENGINEERI
NG GOODS INDUSTRY:
Mr.S
ankhana
thBa
ndy
opa
dhy
ay
(
Economis
t) PROSPECTS AND CHALLENGES
Mr.
AtharI
ma m Ra
za
(
Offic er-E
conomicAna
lys
is) 03J
anua
ry2023

I
ntr
oduc
tion
Theengi neeringsectoristhel argestoftheindustri
alsect
orsinIndia.I
tac count sfor27percentoft hetotal
fac
toriesinthei ndustri
als ectorandr epresents63perc entoftheov erallf
or eigncoll
abor
at i
ons .Indi
ai s
amongt hef ew nationsi nt hewor ld,whos eex port
sar edomi natedbyc api t
algoodsandengi neer
ing
i
tems .In 2021,mor et han 25 perc entoft he tot
alex portbas k
etofI ndi a wasdomi nated byt he
engineeringindustry.Witht her evi
valoft hemac ro-economyin2022f rom thedi sr
upti
onsc ausedbyt he
pandemi c,theengi neeri
nggoods ec t
orstart
edonanopt i
mist
icgrowt handi nv est
mentnote.

I
ndi
ahasc ompar ati
veadv ant
ageov erit
speer si
nter
msofl ow costofmanufact
uri
ngl edbyc heaper
l
abourfor
ce,raw mat eri
alandr es
ources,market
ingknowledge,innovat
ion,andtechnology.Allt
hese
f
act
orsdri
vegreaterinvest
mentintheindust
ry-ani
ndust
ry,whichisheretostayandbecomei ncr
easi
ngly
morei
mpor t
antinthef ut
ure.
Unliket hedemandi nothersectors,t
hedemandi nt heengineer
ingsectorisader i
veddemandf r
om
others ect
ors,suchas,inf
rast
ructure,power
,mining,oilandgas ,refi
nery,steel
,aut omoti
ve,capit
al
goodsandc onsumerdurables.Therefor
e,theriseinthedemandi nt heses ect
orswi l
lsalubr
iousl
y
i
nfluenc ethedemandi ntheengi neeri
ngsec
tor
.India’scapi
talgoodsindustryservesasas tr
ongbas e
foritsengagementac rosssectors,suchas,engineeri
ng,constr
ucti
on,infrastr
ucture,andc onsumer
goods ,amongs tot
hers.

T
radePos
iti
onofEngi
neer
ingSec
tor
Duri
ngApr i
l
-Jul
y2022-23,t
hec umulati
veengi neeri
ngex por
tsrec
orded8.10percentgr
owthasi twent
upto$38.31bi l
l
ionfr
om $35.44bi l
l
iondur i
ngApr -J ul2021-22.TheGov ernmentofIndi
ahass eta
t
argetofUS$127bi ll
i
onforengineeri
ngex por t
sfort heFY23.I nli
newiththetargetf
orentir
ef i
scal
,
t
hec umul
ativet
argetf
orApril
-Jul
y2022- 23onapr o- r
atabasiswas42.33bi l
l
ion.Thi
sachievement,
however
,fel
lshortbyUS$4.03bill
ionregis
tereddur ingt hef
irs
tfourmonths.

AspertheQuickEs
timat
esoftheMinis
tryofCommerc
eandIndus
try
,Gover
nmentofI
ndi
a,t
heshar
e
ofengi
neer
ingint
otalmer
chandis
eexportswas25.
77perc
enti
nJuly2022whi
l
etheshar
ewas24.
34
perc
entonac umul
ati
vebasi
s(SeeTabl
e1) .

T
abl
e1:
Expor
t gur
esofI
ndi
a’
sEngi
neer
ingSec
tor

Sour
ce:Compi
l
edf
rom dat
abyDGCI
&SandQui
ckEs
ti
mat
espubl
i
shedbyt
heGov
ernmentofI
ndi
a

Outoft het otal34 engi

neeri
ngpanel s,24 panel
switnessedposit
iv
ey ear
-on-year(yoy)gr
owthin
export
sdur i
ngJ uly2022vis-
a-visJuly2021.Majordec
lineoccurr
edinironands teel
,copperandit
s
products
,alumi ni
um anditsproductsandleadandproduc t
setc
.Onac umulat
iv
ebas is,27outof34
engineeri
ngpanel srec
ordedpos i
ti
vegrowthduri
ngApril
- J
uly2022-23overt
hec orres
pondingperi
od
ofthelastfi
scal.

Intermsofr egion,max i
mum gr owthinex portswaswi t
ness
edinNor thAmeri
caf oll
owedbyL ati
n
Amer i
caandOc eaniaincumulativ
eterms .Topfiv
ec ount
ri
es,whi
chwitnes
sedposi
ti
v egrowthduring
June2022,wer eUSA,Si ngapore,Ger many,Mex icoandUKwher eastopdest
inat
ionswi t
hnegat i
ve
exportgrowthinJ une2022i ncludeItal
y,UAEandT urkey
.Inthefi
rstf
ourmonthsoff i
scal2022-23,
engineeri
ngex portsachi
eved30.16per centoftheUS$127bi ll
i
ontar
getsetbyt
heGov ernmentforthe
enti
refis
cal.[
1]

I
ntheQ1ofFY2022- 23,theexpor
tofengi
neer
ingproduct
sregis
ter
edahighergr
owthinthemonth
ofApri
lwit
h18.84perc entgrowt
hascomparedtoApri
l2021-22.InJul
y2022,onl
yameagr egr
owth
of0.20percentofengineeri
ngproduc
texpor
twasachiev
edasc omparedtoJul
y2021(SeeChart1)
.

2
 Char
t1:
Mont
hlyExpor
tTr
endi
n2022-
23

Sour
ce:DGCI
&S,Gov
ernmentofI
ndi
aandEEPCI
ndi
a

Ther
ei sa hi
gherdemand f orIndi
an engineer
ing product
sint he USA.The demand forI ndian
engi
neeri
ngproduct
sintheUSAr egi
steredanupti
ckof39. 8percentfrom US$4955.3mi l
li
oni nthe
Q1ofFY2021- 22toUS$6926. 1milli
oninFY2022- 23.Whi l
eotherc ount
ri
esl
ik
eItal
y,Singapor e,
Germany,andMexicofacedheadwinds,Indi
afai
rlyt
radedwi t
hpos i
ti
vegr owt
hinthefi
rstquarteras
comparedtot
hefir
stquarteroft
hepreviousy
ear(SeeTable2).

T
abl
e2:
Count
rywi
seEngi
neerExpor
tsdur
ingApr
il
-Jul
y2021-
22andApr
il
-Jul
y2022-
23

Sour
ce:DGCI
&S

Outoft hetotalengi neeri

ngpr oductexportbasket
,largel
ysteelandi r
onpr oductsareexport
edfrom
I
ndi a.Itisi nterest
ing to noteher ethattheex portofAi r
craft
sand Spac ecraf
tpar t
sand products
signif
icant
lyi ncreasedint hef i
rstquarterofc ur
rentfi
nanci
aly ear2022-23i nc ompar i
sontoQ1of
previousfinanc i
alyear( SeeT able3).TheUSA,F rance,andSi ngaporewerethetopt hreeimport
ersof
I
ndi a'
s'Air
c r
af t
sandSpac ecraft
s'duri
ngApr il
-Jul
y2022- 23inIndia'
stot
algl
obal export
softheproduct
foll
owedbyGer manyandUK.

3
 T
abl
e3:
Produc
tPanel
Wis
eEngi
neer
ingExpor
ts

Sour
ce:DGCI
&S

Themaj ori
mpor t
er sofIndia’sironands t
eelandi t
spr oduct
sareUSA,UAE,Canada,Nepal ,Belgium,
It
aly
,etc.WhiletheI ndianindus tr
ialmachiner
ypr oduc t
saremaj orl
yimport
edbytheUSA,Thai land,
Germany ,China,andBangl adesh.SouthAfri
ca,SaudiAr abia,Columbiaarethemajorimportersof
MotorVehicl
es/Car sandT woandThr eeWheel ersi
nt heAutomobilessegment
.USA,SouthKorea,and
Nether
landwer et het opt
hr eeimpor t
ersofIndia'
sNon- f
err
ousmet al
sandproduct
s'duri
ngApr i
l-Jul
y
2022-23wher easUSA,F ranc eandUKwer ethethreet opimporter
sofIndi
anElec
tri
calMachinery&
Component sduringt hesameper iod.

Singapore,Indones
ia,and Sr
iLanka ar
et helarges
timport
erofI ndian s
hips,boat
sand fl
oat
ing
str
uctur
esfoll
owedbyUKandUAE.I nautocomponentsproduc
tgroups egment,theUSAremai
nedthe
topimpor t
erinthef
irs
tquar
terofFY2022-23foll
owedbyBrazi
l,Bangladesh,andGermany.

St
ate-
Wis
eEngi
neer
ingExpor
tAnal
ysi
s
I
ndiatop12s tat
escont
ributeover90percentofthetotalengi
neer
inggoodsexportandaround47.
5
percentofthetot
alexportsisdonebythr
ees t
atestogethernamel
y-Mahar as
htra,Tami
lNadu,and
Gujarat(
Table4).

4
 T
abl
e4:
Tops
tat
ewi
seengi
neer
ingexpor
tper
for
manc
e-Apr
il
-Jul
y2022-
23
(
Val
uesi
nUS$mi
l
li
on)

Sour
ce:DGCI
&S

I
nt hemont hofJ uly2022,Indi
a'sengineeri
ngex port
swer evaluedatUS$10417. 3mi l
li
oncompar ed
t
oUS$ 8416. 5 mill
i
oni nJuly2021 r egi
st
eringapos i
ti
vegr owthof23. 8 perc
enti ndoll
arterms.
Engineeringpr oduct
s,suchas,bar r
ingmedi cinal& pharmac eut
ic
alpr oduc
ts,allotherengi
neering
panelslikeiron & steel
,non-ferr
ousmet als,mac hi
net ools
,mac hinery,el
ectr
ical& non-el
ectr
ical
,
t
ranspor tequi
pment ,andpr of
essi
onali ns
trumentwitnessedani ncreas
ei nimpor tduri
ngJuly2022
compar edtoJ uly2021.

Theshareofengi
neeri
ngimpor
tsinI
ndia'
stot
al mer
chandi
sei
mport
sdroppedfur
therdur
ingJ
uly2022
i
nc ompari
sontoJul
y2021,whic
hwases t
imatedat15.7perc
ent
.Thef
igurebel
owdepict
sengi
neeri
ng
i
mpor t
sforJul
y2022c ompar
edtoJuly2021( Char
t2).

Char
t2:
Mont
hlyEngi
neer
ingI
mpor
tsf
orJ
uly2022vi
s-a-
visJ
uly2021
(
Val
uesi
nUS
$mi
l
li
on)

Sour
ce:EEPC

5
Themont
hlyt
radebal
anc
eint
hec
urr
entFY2022-
23c
anbedepi
ct
edasf
oll
ows(
SeeT
abl
e5)
:

T
abl
e5:
Mont
hlyT
radeBal
anc
einFY2022-
23
(
US$bi
l
li
on)

Sour
ce:DGCI
&S

I
nst
itut
ional
Meas
ures
I
nfrast
ructureisoneoft hemaj ors uppor t
ingelementsfortheoper at
ionofi ndust
ries . Accordi
ngly
,
st
reamlini
ngandups cal
ingofinfrastr
uc t
uralfac
ili
ti
eshasbeengi venar enewedt hrus ttoachievethe
avowedobj ecti
vesofbotheconomi cgrowt handdistri
buti
veequit
y.Thehi gherbudget aryall
oc ati
onin
i
mpr ovi
ngi nfr
astr
uct
urewouldgi v
eamaj orboostt
ogener atemorerevenuesbyt heengi neeri
ngs ect
or
andthec apit
algoodsindustr
y.TheGov ernmenthasal l
ocated₹99,107c r
ore(US$26. 52bi l
l
ion)inthe
UnionBudget2022- 23t oimprovetrans porti
nfr
astr
uctureinthecountr
ys othatthesmoot hmov ement
ofgoodsf rom oneplacetoanotherc anbemadec osteff
ecti
ve.

Toenhanc ec ompetit
iv
enessint heIndianc apit
algoodss ector
,thegov ernmentannounc edthes econd
phas eoft hes chemei nJ anuarythisy ear.Undert hes c
heme,t hegov ernmentpr ovidesfinancial
assist
anceforc ommont echnol ogydev elopmentands ervicesi
nf rastr
uct
ur e,wit
haf i
nanc i
aloutlayof
₹1,207c rore.TheoutlayincludesBudget arysupportof₹975c roreandi ndustr
yc ontr
ibuti
onof₹232
crore.Sixmaj orc omponent sundert he s cheme have been c ons ider
ed i nc
luding i
dent i
fi
cati
on of
technologi
est hrough t
echnol ogyinnov ati
on portal
s;setti
ng up off ournew Adv anced Cent resof
Excell
enceandaugment ationofex i
sti
ngc ent
res;promotionofs k i
ll
inginc apit
algoodss ect
or;s et
ti
ng
upoff ourCommonEngi neeringFacil
i
tyCent r
esandaugment ationofex isti
ngc entr
es.
[2]

Thei nst
it
uti
onali ni
ti
ati
vesoft hegovernmenthaves i
gni
fi
cant
lysupport
ed t
hedev elopmentofthe
engineeri
ngs ectori
nIndia.Towardst
hisend,t
heengi
neeri
ngindus
tryhasbeende-l
i
cens edandall
ows
100perc entforeigndir
ectinves
tment(FDI)
.Al
so,t
hesect
orcont
ri
butessi
gni
fi
cant
lyt
ot hemerchandi
se
exportofthec ountr
y.

Ri
sksandChal
lenges
Despit
et hestartonabr ightnotein2022,t heengi neerings ect
orofI ndiafacedsev eralheadwi nds,
i
nc l
udingrisi
ngc ostsandl abourshortages.Inthemont hofOc t
ober2022,t heexport
sofengi neer i
ng
gooddec l
i
nedby- 21.26perc ent.Thisalsopos edac hallengetoac hievi
ngt hesect
or alex porttarget
of$127bi l
li
ons etbyt hegov ernmentf orthec urr
entf inancialyear2022- 23.[3]Ass tressedbyt he
Commer ceSecretarySuni lBart
hwal ,both globaland domes ti
cf ac t
orshad an impac ton India’s
export
s.Heal sojus t
if
iabl
yemphas i
sedthatthet i
ghteningofmonet arypol i
cyinmos toft hedev eloped
world–Eur ope,t heUSAandel sewhere-reduc esthedi sposableinc omeoft hepubl ic.Thi sl
edt oa
contr
ac t
ionincons umpt i
on,andi twouldalsodampenI ndia’sexportsincomi ngmont hsahead.

6
Weakdemandf r
om Chi naandEur opesl
oweddownI ndia'sengi
neeri
nggoodsex port
sdras t
ic
allyinthe
mont h ofJ ul
y2022.Engi neeri
ng goodsex port
sgr ew bya meagr e 0.20 perc entinJ uly2022
(year-on-year
)to$9. 56bi ll
i
onasweakdemandf rom Chi naandt heEU,c oupledwi t
hex portdutyon
steelitems,ac t
edasdampener s.
[4]Wh i
leengineeri
ngex port
stotheEur opeanUni on( EU)c ountr
ies
regist
er eda6. 3perc entyear-on-yeardecl
ine,shipmentst oChinaslumped64. 5perc entdur i
ngthis
per i
od.Thes hareofengi neeri
nggoodsex por t
sintot
al mer c
handiseexport
sdec l
inedto23. 69perc ent
i
nSept ember2022f rom 27.85perc enti
nt hesamemont hlasty
ear.Maj ordecli
newaswi t
nes s
edi n
i
ronands t
eel,copperandi tsproduc t
s,al
umi ni
um andi tsproduct
sandl eadandpr oducts
,etc.

TheWayFor
war
d
Indi
a’sengi neeri
ng sect
orwasr evivi
ng pos tthe sl
owdown tri
ggered by t
he pandemi c.Butt he
engineeri
ngex port
sgraduallydecl
inedinthef i
rstquar
terofFY23.Bothexter
nalanddomes t
icfact
ors
areresponsi
bleforthi
ss l
umpi nengineeri
ngex ports
.Thedepreci
ati
ngrupeealsohadani mpac tonthe
export
sofengi neeri
nggoods .Theeconomi esofUSAandt heUK,whi charethemaj orimpor t
ersof
Indi
a’sengineeri
ngpr oduce,arethemselvesfaci
ngadi scer
nibl
eslowdownintheirec
onomi es.

Theevolvi
nggeopol i
ti
calsi
tuat
ionandthedy namicsofglobalec onomicgrowthmak ethecourseof
fut
ureeventsunc
ertai
nandunev en.Thefut
ureglobalgr
owthwillinter
-ali
abeaf unc
ti
onofthevolat
il
i
ty
i
nt hepri
ceofoil
,theRussi
a-Ukrai
newar,thegloball
ysy
nchroni
z eddec el
erat
ionandtheemergenceof
evenstagf
lati
onconcernsi
ns ev
eralpart
softhewor l
d,i
ncl
uding,UK,USA,et c.

TheOECD hadpr oj
ectedthattheslowdowni nt heex por
tsofk eycommodi ti
es,suchas,engi
neer
ing
goods,text
il
es,handloom product
s,andpl ast
icproductswouldadv ers
elyimpacttheGDPgr owt
hofthe
count
ry.Insomec asesofmanuf act
ur i
ngex port
s,Indiaisals
os upply
-constr
ained.Theshort
ageofkey
manufac t
uri
nginputsfrom Chinatogetherwiththec ountr
y’sreaff
ir
mat i
onofi t
scommitmenttoazero
COVID- 19pol i
cy5]a
[ l
sohadadi s
ruptiv
eef f
ectont hi
sindustr
y.

Theengineeri
ngex portsgrowthandmanuf acturi
ngout putgrowthmov eduni di
recti
onal l
yinasmany
asnineoutoftwel vemont hsineac hofthefisc
alyears2019- 20and2020- 21.Dur ingt hefisc
alyear
2021-22,engineeringex portgrowt
handmanuf actur
inggr owthmov edunidi
recti
onallyins evenoutof
twel
vemont hs.
[6]Gi venthi
sk i
ndofas t
rongcorrel
ati
on,i ti
simportantnottov i
ewengi neer i
nggoods
i
ni s
olat
ion,inas il
obutasani nt
egralpartofthelargermanuf acturi
ngindustry.I
ns um,thereisa
symbiot
icrel
ati
ons hipbetweenengi neer
inggoodsandmanuf act
uri
ngs ect
or:whileengineer i
nggoods
provi
desani mpet ust othemanuf act
uri
ng sect
ori nIndia,thegrowt hoft hemanuf acturi
ng sec
tor
posi
ti
vel
yaf f
ect
st hegr owthofengineeri
nggoods .

ENDNOTES
1.https:
//eepci
ndi a.or g/fil
es /
Engi neer i
ng%20T r
ade%20Anal ysis
%20- %20J ul
y%202022. pdf
2.https:
//economi ctimes .indiati
mes .com/ news/economy /poli
cy/government -noti
fi
es-phas e-i
i-
of-
capit
al-
goods -scheme/ arti
cleshow/ 89184660. cms
3.https:
//economi ctimes .indiati
mes .com/ small-
biz/
trade/export
s/insi
ght s/
export-
duty-on- st
eel-
conti
nues-
to-weigh- on- engi neeri
ng- expor t
s -
shipment s
-decli
ne-11-in-s
ept ember /
arti
cleshow/ 95006608.cms
4.https:
//www.thehi ndubus inessli
ne.c om/ economy /engi
neer i
ng-goods -exports
-sl
ows -t
o- 020- i
n-j
uly
-
at-
956-bn/arti
cl
e65797381. ece#: ~:text=Engi neeri
ng%20goods %20ex ports%20grew%20a, steel
%20items
%2C
%20ac t
ed%20as %20dampener s.
5.Mont hl
yEc onomi cRev iew_Sept ember _2022,
htt
ps:/
/dea.gov.
in/sites/ default/f
il
es /Mont hly%20Economi c%20Rev i
ew_Sept ember _2022_F .pdf
6.EEPC,ht t
ps://eepc india. org/f
iles/Engineer i
ng%20T rade%20Anal ysi
s%20- %20July%202022. pdf