Capital goods and engineering market growth is directly correlated with the way industrialization and economic development progresses. The overall upward trend in sectors like steel, automotive, power, oil & gas, refinery is driving the demand in the engineering sector. It is assumed that by 2020, revenue from engineering research and design segment would have increased fourfold.
Following is the chart which displays the overall engineering & capital goods industry
The overall analysis based on Porters 5 forces of the industry provides us with valuable inputs of trend. Diversification both geographically and sector wise is observed. Overall focus has changed towards value addition towards the products. Competition has intensified with few international players entry as a result of De- licensed engineering sector. Following is industry study based on Porter’s 5 forces.
- Threat of substitutes is low.
- Cut throat competition has resulted in low bargaining power of suppliers.
- Capital intensive industry & goodwill of existing players nullifies the possibility of new entrants.
- Intense competition targeting pricing, experience, quality & quantity.
- Buyers bargaining power is low due to technology driven industry
Following the chart displays the key categories of engineer exports
Way forward the outlook of the overall industry looks very bright due to following reasons.
- Elimination of tariffs protection on capital goods
- Reduction of custom duty on range of engineering equipment’s
- Government push for 100% electrification and infrastructure development all over India
- Approval of SEZ’s across India acting as octane buster for engineering sector
- Make in India drive may result into global auto majors ramping up the value of components they source from India.
- Various tax holiday schemes.
- Private sector participation in defense sector
- Power transmission and distribution is set to increase on growth in power generation and privatization of distribution
Sources: www.ibef.org
Ashish Sharma Senior Consultant