In FY23, exports of engineering goods from India stood at US$ 107 billion. North America ranked as the #1 destination with the highest shipment of engineering products from India valued at US$ 23.5 billion with a share of 21.9% of the total engineering exports.

It is a testament to India’s engineering goods might, that despite various challenges arising out of geopolitical tensions and tight financial conditions in major advanced economies, India’s engineering goods exports recorded a year-on-year growth of 10.2% to US$ 10 billion in December 2023. While this represents a strong rebound, the sector still faces uncertainties due to the prevailing global economic conditions.

It has been a challenging period for engineering exporters. Tensions in Europe and now in West Asia have posed significant downside risks. While overall demand remains strong, the Red Sea conflict is a significant issue, causing delays due to increased transit times and additional freight costs, hurting the industry in the short run. The Engineering Export Promotion Council of India (EEPC) believes that entering into more free trade agreements, especially with countries in North America, Latin America and Africa, would provide exporters with deeper access to developed and emerging markets.

Know About India’s Drive to Become an Export


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Engineering Goods Sector Snapshot – India

The engineering sector is the largest of India’s industrial sectors and accounts for 27% of the factories and represents 63% of the foreign collaborations. The sector has a 30% weight in India’s Index of Industrial Production (IIP).

As per the Government of India, Engineering goods are among the 6 focus sectors for a US$1 trillion export target by FY30. India’s manufacturing exports have traditionally grown between 5% and 10% pre–COVID years, but exports have seen tremendous growth over the last two years, with a compound annual growth rate (CAGR) of 15%. India has reached $418 billion in manufacturing exports in FY22.

The engineering sector accounts for 3.53% of the country’s Gross Domestic Product (GDP). The country’s engineering sector comprises manufacturing iron, steel, related products, non-ferrous metals, industrial machinery, automobiles, auto components, and other engineering products. The key goods exported under the industrial machinery category are IC (Internal combustion) engines and parts, industrial machinery for dairy, food processing, textiles, industrial machinery like boilers, parts, machinery for injection molding, valves, and ATMs.

India became a permanent Washington Accord (WA) member in June 2014. It is now part of an exclusive group of 17 countries that are permanent signatories of the WA, an elite international agreement on engineering studies and the mobility of engineers. India’s engineering sector has witnessed remarkable growth over the last few years, driven by increased investment in infrastructure and industrial production.

In 2019, the Indian government announced an investment of US$ 1.5 trillion in infrastructure development over the next 5 years. In the Union Budget 2022-23, the government greatly pushed the infrastructure sector by exclusively allocating US$ 26.52 billion to enhance the transport infrastructure. The engineering sector is an important component of the broader manufacturing sector, and the share of engineering products in overall manufacturing output is quite significant.

“India Shining” in Export Potential

India has identified electronics, engineering goods, textiles, marine & agriculture, toys and pharmaceuticals as the six sectors that could help the country achieve almost 70% of its $ 1 trillion goods export target by FY30.

As per a study by the Commerce and Industry Ministry, these sectors could clock around $670 billion of exports by 2029-30. India’s goods exports in FY23 were $451.07 billion.

Led by drones, solar modules, turbo jets, auto and auto-components, electric vehicles and parts, engineering goods exports are expected to grow to $300 billion by FY30 from $107 billion in FY23.

An analysis of the export quantity in the last few years shows how India’s merchandise exports have shifted away from traditional commodity baskets, such as textiles and gems and Jewellery, and have focused more on engineering goods, organic and inorganic chemicals, and electronic goods. Government initiatives, such as export promotion schemes and sector-specific Production Linked Incentive (PLI) schemes, are enabling India to become a high-value commodity exporter. India has achieved a momentous growth in electronics exports due to a strong domestic manufacturing landscape. For instance, India’s smartphone exports, which were nearly non-existent in 2014, reached a record figure of $11 billion in FY2023 due to the increasing presence of global electronics manufacturers.

Engineering goods export of India had a share of 23.92% out of the total exports during the financial year 2022-23 from the country, as the exports jumped to US$ 107.04 billion. In FY24 (until August 2023), the exports of engineering goods stood at US$ 44.62 billion. The impressive growth in Engineering Goods exports in recent years has largely been due to the zero-duty Export Promotion Capital Goods (EPCG) scheme of the Ministry of Commerce & Industry which forms part of the Foreign Trade Policy (FTP) of the Government of India.

Exports of capital goods contributed about half of the total engineering exports from India. Primary iron, steel, and its products exports accounted for 21.63%, while Non-ferrous metals and products exports contributed 12.61% of India’s engineering goods exports in 2022-23. 17.53% was composed of exports of industrial machinery, 10.24% of exports of electrical machinery, 20.31% of auto and auto parts, and the remaining 17.68% by miscellaneous items, including exports of aircraft, spacecraft and parts and ships, boats, and floating structures.

Source: India Brand Equity Foundation

Top Export Destinations

Indian industrial machinery saw the highest imports from the USA during 2022-23. Germany and Thailand were the two immediate followers of the USA. South Africa, Mexico, and Saudi Arabia were the top three importers of India’s automobiles during 2022-23 in India’s global exports respectively over the same period last fiscal.

During 2022-23, the top three importers of India’s non-ferrous metals and products were the USA, Korea, and Malaysia whereas the USA, France, and Germany were the three top importers of Indian electrical machinery and components during the same period.

Factors contributing to the export boom

1. Strengthening manufacturing capabilities

Since the launch of the ‘Make in India’ movement in 2014, annual FDI growth has doubled from $45 billion in 2014–2015 to $84 billion in 2021–2022, leading to an improvement of the manufacturing sector. Further, numerous PLI schemes across sectors—such as automobile, textile, electronics, pharmaceuticals, and food products—are empowering domestic manufacturers to become globally competitive. India has also been focusing on improving logistics.

For instance, the average turnaround time for container vessels at major ports has improved from 43.44 hours in 2014 to 26.58 hours in 2021.

Recent reforms such as PM Gati Shakti and the National Logistics Policy have been implemented to further reduce logistics costs and increase the competitiveness of our products. India’s rankings in the World Bank’s Logistics Performance Index improved significantly over the years, rising from 54 in 2014 to 44 in 2018 and further advancing to 38 in 2023. This attests to the country’s commitment to improving logistics.

Six mega-trends got fast-tracked during last two years, giving India a tremendous opportunity to propel its export growth in the short term.

Chemicals, pharma, electronics, automotive, industrial machinery, and textiles are expected to propel exports because of the six mega-trends.

2. Trade Regulations

The government has focused on export-specific regulatory developments, which have helped exporters gain global recognition. The introduction of the World Trade Organisation (WTO) compatible schemes, such as the Remission of Duties and Taxes on Export Products (RoDTEP) and Rebate of State and Central Taxes and Levies (RoSCTL), continue to be beneficial.

Recently, the government expanded the list of items applicable under the RoDTEP scheme from 8,731 to 10,481 to boost their shipments globally. These include products across diverse sectors.

3. Changing Global Landscape

The growing sentiment of the ‘China plus one’ strategy among developed economies is putting Indian commodities on the global map. The country is also experiencing growing demand from new markets, such as the Netherlands, Brazil, and Saudi Arabia, which is leading to considerable export gains.

Additionally, India has been proactive in signing Free Trade Agreements (FTAs) with strategically significant countries to boost economic activities. Recently, India concluded FTA deals with Mauritius, Australia, and the UAE, which are expected to further provide impetus to Indian exporters.

For instance, the India-Australia Economic Cooperation and Trade Agreement is expected to increase the total bilateral trade to USD 45–50 billion by 2035.

4. Currency Devaluation

When the value of Indian currency decreases, it makes Indian goods cheaper which in turn encourages foreign countries to import more goods from India. Foreign countries find it extremely profitable to import goods from India when the INR is devalued, hence, exports become cheaper too.

5. Sectoral Export Potential

A Bain & Company report stated that propelled by favourable megatrends in manufacturing, India is expected to scale up its manufacturing exports to $1 trillion by FY28, and much of this growth will come from Chemical, Pharma, Industrial Machinery, Electrical & electronics, Automotive, and Textile & apparel sectors.

Manufacturing is emerging as an integral pillar in India’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables.

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