1. This reeport has been carryed out by the
Indo Italian Chamber of Commerce & Industry in Mumbay (India)
on november 2006
within the Project
“Friuli Venezia Giulia – India: Imprese e Conoscenza”
realized by:
REPORT
ON
MECHANICAL INDUSTRY
IN INDIA
2. CONTENTS
SECTION A: MECHANICAL SECTOR ANALYSIS
1. SECTOR ANALYSIS
2. COMMON MISTAKES IN EXPORT TO INDIA
3. OBSTACLES
4. PARAMETERS OF COMPETITION
5. COMMUNICATION AND PROMOTION
6. PENETRATION IN THE MARKET
SECTION B: GENERAL OVERVIEW
7. INFORMATION SOURCES
8. IMPORT LEGISLATION
9A. BANKING SYSTEM AND EXCHANGE POLICIES
9B.METHODS OF PAYMENT
10. LOCAL JUDICIAL SYSTEM
11. POTENTIAL BUSINESS PARTNERS
12. RISK ANALYSIS
13. LEGISLATION ON INTELLECTUAL PROPERTY RIGHTS
14. LABELLING AND PACKAGING RULES
15. MAIN EXHIBITIONS
16. LOGISTICS
3. EXECUTIVE SUMMARY
The idea of India is gradually changing as number of countries showing interest to invest
in India is increasing. According to an AT Kearney’s FDI Confidence index, India has
displaced the US as the second most favored destination in the world after China. India
attracted FDI at US$7.96 billion during the first half of FY06, as against US$2.38 billion
during the same period in FY05, more than 3 times growth. India’s economy is predicted
to be growing over 8% in 2006 and with a billion plus population India has its wings of
varied culture and business/industry scenario across the country. At the backdrop of such
characteristics prospective investors in any foreign countries will be interested to know
‘Doing business in India in engineering industry’. The study aimed at highlighting
macro-economic indicators of the country with its risk analysis in terms of currency, non-
collection of goods and non-payment. It also discusses obstacles that the prospective
investors may face and appropriate marketing strategies that they should adopt to ensure
smooth landing in the country which requires a good understanding of its geographies
and associated culture and business environment, least but not the last the market
dynamics. While engineering industry in India follows specific classifications of
industries and its associated sub-sectors, industry sectors with their sub-sectors discussed
here are not exactly according to classification followed in India. As a result some of the
industry sub-sectors could not be discussed with adequate data/information. Approach
taken for this study was to collect information/data from various authentic sources like
industry associations, trade agencies and respective ministries wherever applicable. As
far as policy/regulations are concerned respective ministries’ reports and guidelines have
been referred and an attempt has been made to explain them appropriately as relevant
they may be. Salient points which are key findings in this report are given below.
Challenges in the market is still to find the right partner, knowledgeable about
local market and procedural issues for foreign industries investment in India and
can formulate the right strategies with solid foundation for setting up
manufacturing base as JVs as the FDI policy may stipulate in respective sectors
Tariffs (although tariff structure has been reduced considerably since economic
reforms but issues still remain in some specific sectors) and poor infrastructure
still pose a serious challenge to FDI
In addition, heavily bureaucratic investment processes, poor IPR enforcement,
government inefficiency, and corruption have also discouraged foreign investors
Winning strategy overcoming the market entry barriers for setting up an
establishment- a solid regional plan analyzing the local market demand and
economics that work out to be feasible in producing in India and exporting to
other countries in the world leveraging conducive economic factors that otherwise
become an impediment in future growth. For example what auto majors are doing
in India is the right winning strategy to move up in the business plan.
4. While marketing products distribution strategy can really make the difference;
however merit has to be given after due diligence is done and a meticulous plan
should be in place. Small distributors can really make a drastic improvement in
sales growth where flexible marketing strategies play an important role
A joint venture company is generally formed under the Indian Companies Act of
1956 and is jointly owned by an Indian company and a foreign company. This
type of arrangement is quite common because India encourages foreign
collaborations to facilitate capital investments, import of capital goods and
transfer of technology.
All industrial undertakings are exempt from obtaining an industrial license to
manufacture, except for (i) industries reserved for the Public Sector, (ii) industries
retained under compulsory licensing, (iii) items of manufacture reserved for the
small scale sector and (iv) if the proposal attracts location restriction
Being a buyer’s market from seller’s market promotion of products matters much.
The key to gaining rural market share is increased brand awareness,
complemented by a wide distribution network. Rural markets are best covered by
mass media - India’s vast geographical expanse and poor infrastructure pose
serious challenge for communication and hence emphasis must be given in
communication problems to be really effective in selling to rural market which is
opening up widely for some sectors like consumer electronics and home
appliances.
India is still not holding its laws high for protecting copyright issues. As a result
cases of counterfeiting and violation of copyright act happens and probably
judicial system is still not being able to curb the menace. Adjudication of cases is
extremely slow.
Logistics play an important role in distributing products to all corners of the
country. Due to its vast territory challenges in implementing a smooth supply
chain model is really challenging and hence outsourcing to third parties is very
common and an useful and effective strategy to reach market place just in time.
The study reveals some of the sectors with its end user sub-sectors as very much
potential in terms of opportunities for foreign investors and they are: Automotive
components (including high precision machine tools and fasteners), food
processing machinery like cold chain as the retail industry is booming,
commercial refrigeration, optical instruments and precision laboratory measuring
equipments, lamps and related illumination parts, aeronautical industry (JVs with
Indian airline companies for aircraft maintenance) and special purpose machines
6. 1. SECTOR ANALYSIS
Sector 1: Mechanical Components
Definition: A mechanical component is a part/sub-system used in the assembly of
mechanical systems/products.
Type of Products: Components such as fan guards, heat sinks, clips, hinges, castors,
shielding, stamping, card guides, injection mouldings, extrusions, brackets and
general parts for electro-mechanical systems belong to this industry segment.
Use: Mechanical components find wide usage in numerous industries ranging from
agricultural industry to aero-space industry. These products are largely used as inputs
to the capital goods industry. Hence, the demand for this sector depends on the
demand for the capital goods industry.
Overview
Classification: For the purpose of this study, mechanical components are classified as
given below, suggested by Indo-Italian Chamber of Commerce and Industry (IICI).
However, the industry classification is not rigid as there may be overlapping of
segments.
Classification of Mechanical Components
• Mechanical parts and sets (metal manufacturing on iron and non-iron alloys,
stainless steel and aluminium)
• Various mechanical components
• Precision components
• Connectors, pistons, special screws
• Special equipment
Industry Size & Trends
The table given below presents industry size and trends by sub-segments
Industry Size & Trends
Sub-segment Market size (Rs bn) Market size (Rs bn) Growth over FY
FY 2006 FY 2005 2005
Mechanical parts and 107.45 81.61 31.67
sets
Mechanical 9.03 8.26 9.3
7. components production
Precision components 8.7 7.08 22.8
Connectors, pistons, 444 338.52 31.16
special screws
Special equipment 58.3 53.00 10
Total 627.48 488.47 28.46
Source: Estimate by Cygnus Research
Sub sector: Mechanical parts and sets (metal manufacturing of iron and non-iron
alloys, stainless steel and aluminium)
Mechanical parts and sets segment consists of Castings and Forging Industry and
Seamless Steel Pipes & Tubes.
Indian Castings and Forging Industry
Type of Products
This sector includes low-tech items like castings and forgings.
Use of the Products
Casting products constitute essential intermediates for automobiles, industrial
machinery, power plants, chemical, fertiliser plants and other engineering
applications.
Overview
Since end of 2002, the industry picked up momentum as steel industries gradually
was moving up. In 2004-05, production increased by 26.9% from 732 thousand
tonnes to 929 thousand tonnes, while exports increased by 24% from US$250m to
US$310m. Capacity utilisation also improved considerably from 40-50% in previous
years to 85% of the additional capacity added during the last two years (1.5m approx)
inclusive of overseas acquisitions. This was largely due to the revival in demand from
the automotive sector and particularly the passenger car segment, which recorded an
excellent performance in both domestic market and exports.
Indian Castings and Forging Industry Production & Export Trend: 2003-06
2003-04 2004-05 2005-06 2006 over 2005 % Change
Production (‘000 tonnes) 600 732 929 26.9
Export (US$m) 178 250 310 24.0
Source:http://www.indianforging.org/
In the year 2005-06, six major companies—Ahmednagar Forgings Limited, Amforge
Industries Limited, Bharat Forge Limited, Electrosteel Castings Limited, Mahindra
Forgings Limited and Shree Ganesh Forgings Limited—recorded estimated sales of
Rs36.95 billion, up by 26.52% over the previous year.
8. Major Markets
The industry’s major export markets are the US, Europe and China. However, only
30-35 manufacturing units are directly engaged in exports at present.
Outlook
The future looks encouraging for castings and forgings industry in terms of the
expected surge in global demand. In 2006-07, production is expected to touch 1180
thousand tonnes while exports are expected to touch US$388 m. As a result of
liberalisation, more MNCs have entered the domestic automobile market. This has
opened up more business opportunities for castings and forging industry.
Seamless Steel Pipes & Tubes
Type of Products
This sector includes steel pipes and tubes (including stainless steel).
Use of the Products
In oil sector, seamless steel pipes and tubes are extensively used as line pipe, casing
pipe, production tubing, drill pipe etc. In non-oil sector, these are used in a number of
important industries like power equipment, automobiles, chemical plants, fertilisers,
petrochemicals and industrial machinery.
Overview
The size of Indian seamless tube market is around 0.5m tonnes. In India, there are six
manufacturers of seamless steel pipes and tubes. ISMT Limited, one of the major
companies is the largest integrated manufacturer of specialised seamless tubes in the
Asia-Pacific region. The industry is able to manufacture tubes up to 245mm OD and
is, by and large, meeting complete requirement of bearing and high-pressure boiler
industries. With the expected substantial growth in the power and automobile sectors
in the future, the demand pattern may change in favour of these two sectors. In the oil
sector, three units have got American Petroleum Institute's (API) certification for
manufacture of line and casing pipes. Oil sector accounts for around 60% of total
requirement of seamless steel pipes. Bearings, automobile and boiler sector contribute
around 30% demand.
Welded Steel Pipes & Tubes
Welded steel pipes and tubes consist of a wide variety of pipes and tubes like line
precision pipes, tubular poles, Hamilton poles, API pipes, electric poles and light-
weight galvanised pipes for sprinkler irrigation. At present, there are about 123 units
engaged in the manufacture of welded steel pipes and tubes in the organised sector.
9. India’s manufacturing capacity of these types of pipes and tubes are adequate. The
capacity utilisation for the manufacturing of welded pipes has improved substantially.
Three-layer, polyethylene-coated pipes used in the oil sector are also being
manufactured in the country.
Stainless Steel Welded Pipes & Tubes
Stainless steel pipes find application in petrochemical, fertiliser, power and nuclear
plants along with other corrosion-resistant applications. Mother pipes are being
manufactured by only two units and other units are engaged in the manufacture of
cold drawn seamless pipes and welded stainless steel pipes. Adequate domestic
capacity is available to meet the requirement of the industry in general. However, a
large part of supply to industries is from unorganised market as well.
Major Markets
The industry’s major export markets are the US, Europe and Far East.
Sub sector: Mechanical Component
Type of Products
This sector includes components / machine tools produced using non-NC machines.
Use of the Products
These are used as inputs in capital goods industry.
Overview
The following table gives the performance of the segment for the last three years
ending March 30, 2006.
Non-NC Mechanical Component Production Trend: 2003-06
2006 over 2005 %
Production 2003-04 2004-05 2005-06 Change
Quantity (numbers) 5,047 3,406 3,370 -1.06
Value (Rs m) 5,508.161 7,270.524 8,723.95 19.99
Source: Indian Machine Tools Mfrs. Association( http://www.imtma.in/)
In 2005-06, Non-NC Mechanical Component output was worth Rs8723.95m, up by
19.99%. Though production in 2005-06 was little lower than 2004-05 but price
realisation was little more due to increase in steel pricess.
10. Sub sector: Precision Components & Equipment
Type of Products
This sector includes components / machine tools produced using NC machines.
Use of the Products
These products are used as inputs in capital goods industry.
Overview
This segment is growing rapidly due to growth in automobile sector along with its
component manufacturing facilities. Trend in the NC mechanical component
production during 2003-06 is givfen in the following table.
NC Mechanical Component Production Trend: 2003-06
2006 over 2005 %
Production 2003-04 2004-05 2005-06 Change
Quantity (numbers) 2880 3755 4432 18.03
Value (Rs m) 5533.37 7971.67 9364.89 17.48
Source: http://www.imtma.in/
In 2005-06, NC mechanical component output was worth Rs. 4432 m, up by 17.48%
over 2004-05.
Sub sector: Connectors, Pistons, Special Screws (Auto Components other than
electrical parts and other components)
Type of Products
This sector includes fasteners (nuts, bolts, and screws), bearings and other auto
components like pistons (including industrial pistons).
Use of the Products
These products are used as inputs in capital goods industry.
Overview
Fasteners are broadly divided according to consumer segments—automobile sector
and industrial sector. Industrial fasteners are used in varied applications like
construction, railways and manufacturing sector. Total demand for fasteners is almost
11. equally divided between automotive and industrial sectors. Thus, automobile sector is
the largest end-user segment for fasteners.
Industrial Fasteners
Fasteners include production of nuts, bolts and screws. They are made from cold
heating steel and carbon steel. A significant quantity of raw materials has been
imported; however, the contribution of imports has been decreasing during the past
few years.
Market size and segmentation: Total market size of the fastener industry is estimated
at around Rs15 billion in revenues. Fasteners market can be classified into mild steel
(MS) and high tensile (HT) fasteners. MS fasteners constitute about 30% of the
market size and are mainly produced by the unorganised sector, while HT fasteners
are produced primarily by the organised sector. HT fasteners are further classified
into standard fastener and specialised fastener segments. Specialised fasteners are
mostly customised according to the requirements. There are a few thousand types of
fasteners owing to the lack of standardisation in the industry. Different automobile
companies have divergent specifications while industrial fasteners have numerous
applications and requirements. It leads to a greater contribution from the unorganised
industry. It is estimated that the unorganised sector contributes to about half of the
fastener market size.
Industrial Bearings
Bearings are used to minimise friction between moving parts and find application in
rotating parts of virtually all machines and automobiles. Bearings are produced in
various sizes and shapes with the smallest bearing weighing only a few grams to the
largest one weighing a few tonnes.
Automobile sector is the major demand driver for the bearing industry and constitutes
almost 50% of the total demand in value terms. The demand from the automobile
sector is almost equally divided between OEM demand and replacement demand.
Market Size and Segmentation: The total size of the bearings market by revenues is
estimated in the range of Rs25-30 billion. The bearings industry consists of bimetal
bearings and anti-friction bearings. The anti-friction bearings comprise Rs15-20
billion of the bearings market and bimetal bearings comprise the rest of the market.
The anti-friction bearings can be further divided into ball bearings and other types of
bearings like roller, needle, taper and cylindrical. The ball bearings segment is the
biggest segment of the industry and comprises approximately half of the total market
size in volume terms.
Imports comprise approximately 25-30% of the total market. Imported bearings are
mostly of large dimensions and are not produced in the country due to relatively low
demand for the specialised segments.
12. Auto component industry
Surge in automobile industry since the nineties has led to robust growth of the auto
component sector in the country. Responding to emerging scenario, Indian auto
component sector has shown great advances in recent years in terms of growth,
spread, absorption of newer technologies and flexibility, despite multiplicity of
technology platforms and low volumes. India’s reasonably-priced skilled workforce,
large population of technology workers coupled with strengths gained by the country
in IT and electronics all build up an environment for significant leap in component
industry. The Indian auto component sector is being seen as the next industry that has
the potential to become globally competitive, after software.
Indian auto component industry, with a turnover of Rs365.40 billion in the year 2004-
05 and manufacturing all the key components required for vehicle manufacturing, is
an important sector of the automotive industry. The Phased Manufacturing Policy
(PMP) followed in the 1980s enabled the component industry to induct new
technologies, new products and a much higher level of quality in their operations that
enabled quick and effective localisation of the component base. Over the years, the
industry has played a key role in the growth and development of the country’s
automotive industry.
After a lull following global economic slump, auto component industry’s growth rate
bounced back to 38% in 2002-03. However, the industry could not sustain such a high
growth rate and could achieve a growth rate of only 24% in 2003-04 and 16% in
2004-05. Indian auto component industry has seen major growth with the arrival of
global vehicle manufacturers from Japan, Korea, the US and Europe. Due to
diversities in the technological profiles of these OEMs, the sector today produces
large variety of components. Today, India is emerging as one of the key auto
component centres in Asia and is expected to play a significant role in the global
automotive supply chain in the near future.
Auto component industry Indicators: 2002-05
2002-03 2003-04 2004-05
Output* 245 306.4 365.4
Exports* 38 46.2 62.37
Employment^ 500,000 500,000 500,000
*Rs bn
^persons
Source:ACMA
13. Sub sector: Special Equipment & Machines
Type of Products
This sector includes, process control instruments, analytical instruments, electrical
test and measuring instruments, survey and geo-scientific instruments and medical
instruments.
Use of the Products
Process control instruments, analytical instruments, and electrical test and measuring
instruments are used for measuring and controlling temperature, pressure, strain,
force, flow and level of fluids, pH and conductivity. Survey and geo-scientific
instrument products are used for surveying and measuring geological variables.
Medical instruments include instruments such as blood pressure monitors, digital
thermometers, Nebulisers, TENS machines and body fat monitors.
Overview
According to estimates by Industry Chambers, at present, the total cost of production
of instrumentation related products in India is around Rs50 billion per annum. Sector-
wise breakup is shown in the Table. The growth rate is 10-15% per annum. This
production is about 15% of the total demand; the rest is met by imports. Except for a
handful of them, all companies are operating in low-end products.
Cost of annual production of instrumentation related products in
India (Rs M) :2003-06
2004-05 2005-06 % 2003-06
2003-04 Change CAGR
2005
Over
2004
Process Control Instruments 3337.39 3358.39 3740.52 11.38 5.87
Analytical Instruments 9108.90 9921.80 11104.90 11.92 10.41
Electrical Test & Measuring
Instruments 23163.83 24055.13 27397.70 13.90 8.76
Survey & Geo-Scientific
Instruments 1831.95 1843.45 4305.60 133.56 53.31
Medical Instruments 5952.57 6901.14 7508.00 8.79 12.31
Total 43394.64 46079.91 54056.72 17.31 11.61
Source: Indiastat, Cygnus Research
Process Control Instruments
There are about 26 units in manufacturing process control instruments and systems in the
organised sector, out of which seven units are capable of taking up complete turnkey
projects for the entire instrumentation system, including software required by process
14. industries. The industry is in a position to meet approximately 62% of the country’s
demand.
Analytical Instruments
The market for analytical instruments solutions in India is estimated to the tune of over
Rs11.00 billion, comprising various institutions related to laboratories, pharmaceutical
and biotech sector, clinical research, environmental, metallurgy, universities,
petrochemicals and nuclear research. The market in India grew at around 12% in 2005-06.
Considering the emerging clinical research segment in India; the growth of industries in
the areas of pharmaceutical, biotech and petrochemical sectors; and demand for
environment-related solutions, this growth is likely to become a minimum 15-20% in the
coming years
The domestic manufacturers account for only 10% while the rest is met by imports.
Eyeing the potential, many leading players have already integrated India as part of their
global agenda and all the top ten leading global companies have set up offices in India.
While most of these companies were operating through distributors until a few years ago,
now most have own subsidiaries to run Indian business. This includes companies like
Thermo, Fisher, Waters, Agilent, Sartorius, Shimadsu and niche players like Dionex
(liquid chromatography). Inability of the Indian manufacturers to invest heavily in high-
end technologies and in R&D is the reason why most of the Indian manufacturers are
keeping a low profile, note industry sources.
Electrical Test & Measuring Instruments
The market for Electrical Test & Measuring Instruments in India is estimated to the tune
of over Rs27.4 billion. The market in India grew at around 13.9% in 2005-06. The market
is expected to grow at around 15% for the next few years. Domestic manufacturers
account for 30% while the rest is met by imports. In the coming years domestic
manufacturers are expected to increase their market share.
Survey & Geo-Scientific Instruments
The market for Survey & Geo-Scientific Instruments in India is estimated to the tune of
over Rs4.31 billion. The market in India grew at around 133.56% in 2005-06. The market
is expected to grow at around 20% for the next few years. Domestic manufacturers
account for 9% while the rest is met by imports. In the coming years domestic
manufacturers are expected to increase their market share.
Medical & Surgical Equipment
The market for Medical & Surgical Equipment in India is estimated to the tune of over
Rs7.51 billion. The market in India grew at around 8.79% in 2005-06. Indigenous
manufacturers are currently in a position to manufacture a wide variety of electro-medical
equipments such as electro-cardiograph (ECG machine), X-rays scanner, CT scanner,
15. short-wave physiotherapy unit, electro-surgical units and blood chemistry analyzers. The
indigenous industry is capable of fulfilling about 35% of the demand and the rest is met
by imports.
End-user sub-sectors
Hydraulic Machinery
The Indian hydraulic industry had its beginning in the sixties and the main objective
behind establishing this industry was to provide substitutes for imported machinery.
Hydraulic machinery from a long time is used in heavy engineering industries
(extensively like shipping, power driven machine tools, automobiles, etc.).
Growing investments in every sector and the Capital Goods Index which has shown a
growth rate of 13.6% in FY06 are projecting a high positive image over the demand for
hydraulic machinery. Demand for hydraulic machinery for FY05 was projected to be
around Rs1,483 crore (US$339.01m) which is growing at a compounded annual growth
rate (CAGR) of 11.99% from 2002 till 2005.
Range of product specifications in the hydraulic industry is wide and the volume of
production in comparison to that is not high. Hydraulic machinery has high quality
standards and therefore requirement of R&D services in this industry is very high and
also demands a high investment. These things make the manufacturing of hydraulic
machinery a capital-intensive one.
Indian manufacturers of hydraulic machinery are going for joint ventures with foreign
technology suppliers in order to obtain new technologies. These technologies are required
to succeed in the market that is dominated by imports.
Opportunities
There is a good demand for hydraulic machinery but the Indian manufacturing base is yet
to come up with a suitable technology base to manufacture heavy duty hydraulic systems.
Foreign investment in this sector would be conducive for its growth. However, precision
casting manufacturers in India at present are not many but with increased inflow of
foreign investments more organized casting manufacturers will be operational. The
current surge in automobile demand is another driving factor for a growth in demand in
hydraulic machinery.
Indian Pumps Industry
The Indian pumps industry caters to a range of sectors from agriculture to nuclear power
generation. The industry, holding €500m worth of global market share as in 2005, is
expected to capture a bigger slice in 2006. Pumps Manufacturing Industry in India is
growing at a rate of 10-12% per annum. Approximately 6,000 pumps are manufactured in
a day in India.
16. This industry exports to nearly 70 countries around the world. According to industry
estimates, India produces around one million pumps of various kinds. There are around
800 large, medium and small units producing pumps.
Technical Sustainability: India has today become a reliable, technically competent,
competitive and enterprising outsourcing option for many multinational companies in
industrial pumps. This has emerged through technical collaborations and joint ventures
that Indian companies have with multinational majors.
In addition, various research institutes such as the Small Industries Testing and Research
Centre (Si'Tarc) in Coimbatore have developed energy-efficient designs for pumps to
meet the norms of Indian standards. The Indian pump industry has a record of indigenous
research and development in all the three areas of technological intensities - from mass-
produced pumps for agriculture to gigantic pumps for interlinking rivers, and pumps for
critical services such as nuclear power generation.
Growth Drivers: All the core sectors of the industry namely power, oil & gas, water &
infrastructure projects, metal & mining, chemicals, drugs & pharmaceuticals, food &
beverages require various types of pumps and all these industries are growing at a
significant rate today in India.
Textile Machinery
Textile machinery manufacturing is a Rs21,024m (US$471.98m) industry in FY06. This
industry derives its demand from the textile industry which is one of the oldest industries
and has been a back bone for the Indian economy. Growth in Textile machinery
production in India has been very dull for quite some time; this industry has seen a near
to nil growth during the period of FY02 to FY04. But in January 2005 the industry had a
turn around due to quota abolition that brought about a positive note in all the textile
industries and prompted them to go for technologically advanced machinery for
producing international quality of fabrics. As a result textile companies preferred to
import textile machinery from abroad as domestically manufactured machinery were not
technologically advanced like machinery manufactured in European countries.
However, domestic textile machinery production has registered a growth of 9.16% and
53.36% for FY05 and FY06. These growth rates were achieved by domestic
manufacturers with a shift in technology levels of machinery and the competitive prices
that was offered.
Demand Drivers: Growth in the demand for textile machinery is expected from the
growing textile industry. Customs duties on imported textile machinery has been reduced,
reduction in government restrictions on the import of used capital goods has also
prompted industries to import second hand machinery from abroad with a good residual
life. The existing units undertook capacity expansion that triggered a growth in textile
machinery production.
17. Opportunities
Many representatives’ offices are already there in India who are having their principals in
many countries across the world. As metamorphosis has already happened in the industry
in the post WTO scenario it is a matter of global market force that Indian textile industry
is shaken up for technology upgradation. Under such impacting growth drivers
opportunities lie either in collaborating with a good partner in India to produce textile
machinery or setting up manufacturing units producing components for textile machinery
as lots of imported machinery is installed. Indian machine tools industry is also shaping
up and as a result setting up manufacturing units with local supply of components are
also possible.
Automobile Industry
The Indian automobile industry which is worth Rs960 billion (US$21.94 billion) is one of
the fastest growing automobile industries in the world. This industry has been registering
a compound annual growth rate (CAGR) of 14.5% for the last five years (2000-05) with a
projected growth in 2006 being 17%. Growing initiatives of Indian government in turning
India into a hub for small car manufacturing is attracting huge foreign investments.
Growth in automobile exports has been registering an average rate of 45% for the past
five years (2000-05), with passenger cars and two wheelers having 22% and 60% share in
it.
Two Wheelers: India is the world’s largest manufacturer of two wheelers with a growth
of 15.49% CAGR for the last five years (FY02-FY06). Total two wheeler production in
2005-06 was 7,600,801 (nos.). The share of the two wheelers segment in the entire Indian
automobile market was 70.19% in 2005-06. An upsurge in the Indian economy has
attracted more and more buyers. This has increased the number of people who can afford
a two-wheeler. The intrusion of foreign and merchant bankers have resulted in easy loans
for both the consumers and the entrepreneurs.
The Indian two wheeler market is occupied by five players who have established
themselves with a strong infrastructure, R&D and after sales service support. There are
Japanese OEM’s as well as Indian OEM’s. Hero Honda is the leading motorcycle
manufacturer in India followed by Bajaj Auto Limited.
Passenger cars: The Indian passenger car segment has been growing at a CAGR of
18.23% during FY01-FY06. In this segment small cars occupy around 80% of the
production and sales. Projected CAGR for overall passenger vehicle during 2005-2014
being 9% forecasts a healthy growth. Total 4 wheelers production in 2005-06 was
1,720,897 units. Small cars that are in the affordable price range in terms of Indian
income levels, is attracting major demand, but increase in levels of disposable income
with Indian customers, due to a growth in the economy is gradually increasing the sales
of upper segment or luxury cars also. Maruti Udyog Limited is the leading small size car
marker. There are Japanese, Korean, American and European OEMs along with Indian
OEMs. Foreign manufacturers like Hyundai, GM, Toyota, Skoda, Auto, Volvo and Ford
that have manufacturing facilities in India.
18. Commercial Vehicles: The Indian commercial vehicles market is broadly categorized
into LCV & MHCV (Medium & Heavy Commercial Vehicles). This segment has been
experiencing a CAGR of 24.55% (FY01-FY06). Total commercial vehicle production in
2005-06 was 391,000 units. Recent growth trends in this industry are because of
increasing investments in infrastructure. Export of commercial vehicles was only 5% of
the total Automobile exports (FY05), but this share is expected to grow with increasing
investments in the commercial vehicles segment from global majors.
Laboratory Equipment
Growing awareness among public and private enterprises about the requirement of R & D
facilitations in order to become more competitive in the world market is leading to an
establishment of R&D units. These new R&D units and modernization of existing units
are creating a higher demand for laboratory equipment.
In India R&D spending is dominated by the Central Government followed by the private
industry. Demand for laboratory equipment is more from the Council of Scientific and
Industrial Research (CSIR), Defense Research and Development Laboratories (DRDL),
Department of Space, and the Department of Atomic Energy. In private industries steel,
pharmaceuticals, telecommunications, and biotechnology sectors are creating a demand
for laboratory equipment.
All the sectors mentioned are experiencing impressive growth rates and attracting high
investments. India for many MNCs has become the major out sourcing destination for
their R&D services. Companies like Nokia and Intel have already established R&D hubs
which will enable requirements for laboratory equipment.
Opportunities
The LAB products that also have better prospects in the Indian market include:
spectrophotometers, HPLC systems, RIA analyzers, electron microscopes, multi-
chemistry analyzers, batch analyzers, random assay analyzers, fully automated
continuous/random analyzers, ELISA readers, electrophoresis instruments, liquid
chromatograph, osmometers, and blood gas analyzers.
Medical Equipment
The medical equipment market is in the throes of rapid modernization. This industry is
currently worth US$1.85 billion. The demand for hi-tech products is close to 80% of the
overall market in India. The domestic market comprises of low-tech devices. Major
international medical equipment giants are lining up their investments in India for setting
up a local base. The Indian health imaging market is expected to double from the existing
US$350m by 2010. X-ray, ultrasound, CT and MRI are expected to collectively account
for 68.6% of the health imaging market.
19. Medical equipment industry is heterogeneous, comprising sub-markets, each
experiencing different growths. Imported equipments are sold by authorised distributors
who look after the sales and service aspects. Manufacturers can be sub-divided into
Indian operations of MNC’s (Siemens, GE) and local companies. Most of the local
manufacturers are in small scale sectors with a limited market reach. Apart from 6-8
major companies, no big company has a distribution or support network in India, with
most of them dependent on the local dealers/ suppliers for furthering their business
interest.
A number of private entrepreneurs are planning to enter the Indian healthcare sector.
Growth in demand is seen for Products like Intensive Critical Care Unit (ICCU),
Heart/Lung machines, linear accelerators, Doppler, ultrasound machines, MRI scanners
etc. Cardiology equipment accounts for 20% of the total market followed by imaging
systems with 15%. Private sector entry into the Indian insurance market has opened a
vast scope for high-end medical facilities and healthcare equipment market as well.
Demand drivers for this industry
Healthcare Industry
The Indian healthcare industry has emerged as one of the largest service sectors in India.
Healthcare spending in India is expected to rise by 12% per annum. An estimate suggests
that by 2012 healthcare spending could contribute 8% of GDP and employs around 9m
people. Rising incomes and growing literacy are likely to drive higher per capita
expenditure on healthcare. The trend is shifting from infectious diseases to lifestyle
diseases due to a change in lifestyle particularly in the urban and semi-urban locations.
Indian healthcare industry though huge is not enough to meet the requirements of the
Indian population. There is a requirement of around US$20 billion investments in the
healthcare industry. The Indian government is planning to do this invest in multiple
phases, which will create a higher demand for healthcare equipment. Growth in income
levels and awareness towards health in Indian population is leading to increased
healthcare spending. This means more private hospitals apart from government run
hospitals are yet to be established. Demand for Indian healthcare equipment is increasing
in the third world because of their low cost product and services.
Opportunities
An immense opportunity for foreign investment is there in the medical equipment sector.
Increased spending on healthcare will drive more demand into this sector. Hi-tech
equipments in the operation theatre will be more in demand. Similarly devices related to
lifestyle diseases too would be on high demand.
20. Printing Machinery (for print media)
India has more than 130,000 printing presses by the end of 2005. Though demand for
printing machinery in India for FY06 is around Rs850 crore (US$210.9m), production of
printing machinery for that duration is valued at Rs308.4 crore (US$69.14m). While the
remaining requirement is met through imports which are of the order of about Rs 550
crore (US$123.47m).
The sector that is driving the demand for printing machines is the Indian newspaper
industry with a turnover of US$1.84 billion in 2004, which is growing at a CAGR of
6.9% during 2000-04. This industry has attracted capital investment of US$2.27m in two
years by the end of 2004. The Indian media industry is undergoing a modernization
process in order to gain from these growth opportunities. In this process they have
realized the need for technically advanced printing machinery to achieve success in the
tough competition. Since the machinery manufactured in India is not meeting their
requirements many newspaper/media companies are importing them from Europe and
Japan.
According to NPES, the Association for Suppliers of Printing, Publishing, and
Converting Technologies three major European manufacturers Man Ronald, Heidelberg
and Koenig & Bauer AG (KBA) sold around 100 units to the Indian print industry.
Mitsubishi has installed 71 units in the country. By the end of 2005, 250 new units were
estimated to be in the process of import.
The Indian Printing machinery manufacturers in order to sustain the competition have to
improve technology wise too..
Opportunities
The Indian printing machine manufacturers are not equipped with the latest technology
hence large demand is catered through imports. Recently the print media has been
allowed for 100% foreign direct investment and as a result the foreign print media
companies are attracted towards India. This may further increase the growth in the
demand for printing machines.
Automotive Components Industry
The Indian auto component industry has been growing at 20% CAGR for the last five
years (2000-05). Projected CAGR during 2005-14 is 17%. The Indian automobile
industry which is putting huge efforts in foraying into the European and American
markets is facing stringent technical and safety norms. In order to fulfill these norms and
also push sales in these regions they are investing heavily in acquiring high end auto
components, which drives the demand for this industry. Increasing investments in
production and technology levels in the automobile industry is another driving force for
the creation of higher demand for auto components. Many MNCs are present in
automotive component manufacturing like Delphi, Bosch, Denso, Lear, GKN, etc.
Companies like Tata Motors, Bharat Forge, UCAL Fuel System, TVS Autolec Ltd. etc
21. are some of the automotive component manufacturers that are also investing in the
overseas markets.
Auto component exports were growing at 25% CAGR during 2000-05. It is projected to
grow 34% during 2005-2014. The manufacturing components industry in India is fast
emerging as a very cost effective, OEM/Tier1 supplier; as a result many vehicle
manufacturers in the world are trying to get benefit from this. Even the Indian
government is encouraging this by allowing 100% foreign direct investment in this sector.
Opportunities:
As per BMI Research, in the Asia/Pacific business ranking, India holds the no.1 rank in
the region. The future growth potential is high; the Indian passenger car market demand
is currently huge and has ample room for further volume growth. A stable market
oriented economy is also conducive for a solid growth in the near future. At the backdrop
of such positive vibes in the market opportunities are significant.
Aeronautical Industry
Aviation is the key driver to any country’s global economy. Air travel in India is no
longer considered a luxury but a necessity. This has been realized by the Indian
government who have designed plans and started implementing them in order to sustain
the growth rate that is being achieved in recent years. These plans constitute investing
Rs1500 billion (US$3.36bn) in the next five years for buying aircraft, upgrading airports,
conducting research and development, improving air traffic control and fabrication of
components. This will create a huge impetus in the growth of the Indian aeronautical
industry.
There is immense potential in India for setting up industries to build aircraft. The existing
fleet with Indian Airlines, Air India, Jet Airways, Air Sahara and Deccan Airlines are
limited and they are expanding their network. India is heavily dependent on foreign
countries for buying and leasing civilian aircrafts such as Boeing and Airbus. Action
plans are being taken by the Indian government for setting up parallel aircraft industry to
design and manufacture small, medium and wide-bodied passenger aircraft as well as
maintenance and overhauling facilities of aircrafts.
The Hindustan Aeronautics Limited (HAL) India’s largest aeronautical organization
manufactures various types of military aircraft and helicopters. Today, HAL has 16
Production Units and 9 Research and Design Centres in 7 locations in India. The
Company has an impressive product track record - 12 types of aircraft manufactured with
an in-house R&D and 14 types produced under license. HAL has so far manufactured
3,550 aircraft (which includes 11 designed indigenously), 3,600 engines and overhauled
over 8,150 aircraft and 27,300 engines.
HAL has been successful in numerous R & D programs developed for both Defence and
Civil Aviation sectors. HAL has made substantial progress in its current projects:
22. • Dhruv, which is Advanced Light Helicopter (ALH)
• Tejas - Light Combat Aircraft (LCA)
• Intermediate Jet Trainer (IJT)
• Various military and civil upgrades.
• There are three joint venture companies with HAL:
• BAeHAL Software Limited
• Indo-Russian Aviation Limited (IRAL)
• Snecma HAL Aerospace Pvt Ltd
Apart from these three, the other major diversification projects are Industrial Marine Gas
Turbine and Airport Services. Several Co-production and Joint Ventures with
international participation are under consideration.
HAL's supplies / services are mainly to the Indian Defence Services, Coast Guards and
Border Security Forces. Transport Aircraft and Helicopters have also been supplied to
Airlines as well as to various State Governments in India. The Company has also
achieved a foothold in export in more than 30 countries, having demonstrated its quality
and price competitiveness.
Opportunities
The growth in aeronautical industry is almost certain as aviation industry in India is
poised to grow further. Another reason for the high growth in aviation is due to no frill
airlines (low cost airlines). Due to an upsurge in air traffic in India aircraft maintenance is
in great demand. It is even economical to have maintenance facility for aircrafts in India
compared to other developed countries. Opportunities are envisaged in manufacturing
light bodied aircraft, other aircrafts and components for aircraft maintenance. 100% FDI
is allowed in airport infrastructure and 49% for civil aviation. This will create lots of
opportunities for foreign investments as modern airports will have better aircraft handling
and landing facilities. As a result the aeronautical industry and its allied engineering
products will have a great market potential in India.
Shipbuilding Industry
Indian sea trade by volume and value is 90% and 70% respectively. But the priority for
the shipbuilding industry has been very poor till the mid 90’s. The shipbuilding policy
was liberalised in 1991 by allowing private sector participation in building all types of
ships. The Indian shipbuilding industry has risen to the 8th rank globally in terms of order
23. book position. Indian shipbuilding industry had orders of 977,400 DWT i.e. 91 ships by
the end 2005. The current order book is dominated by vessels less than 10,000 DWT.
Shipbuilding order book has crossed US$1 billion of which bulk cargo occupies a major
share with US$330m. Export revenue is two thirds from the total revenue and export
orders are mainly from the European owners.
Private and public participation in shipbuilding is equal at present but in future it is
expected that private players will have a major share. This is expected on the basis of
problems that public companies face like low technical efficiency, labour related issues
and production performance.
The three important private players in this industry are- ABG shipyard, Bharati shipyard
and Chowgule shipyard. The order book of these companies by the end of 2005 was
US$281.1, US$171.4m and US$111m.
The Indian shipbuilding industry is facing many challenges such as lack of design and
heavy engineering facilities, absence of exposure to new technologies that can be
incorporated in the ships, being confined to small specialised and conventional vessels
and scarcity of qualified professionals. About 80% of the raw material is imported
thereby imposing higher cost of manufacturing coupled with poor infrastructure and
inefficient supply chain management, impeded a healthy growth of the industry.
Opportunities
Future prospects for the Indian shipbuilding industry are expected to be bright with a
growth in Economy, which will result in higher investments in infrastructure (logistics)
making it more competitive.
Valves Production
Valve production in India comes from both the organized and unorganized sectors. The
organized sector of the valves industry is around Rs 950 crore (US$210.9m), while the
unorganized sector contributes Rs 550 crore (US$122.1m) as per 2005 figures. Valves are
imported heavily from China and other countries; Import for the FY06 is around Rs 460
crore (US$103.27m), an increase of 24% to that of previous fiscal year. The import is
largely for precision type of valves mainly used in process industries like Pharma, Food
processing, steel, and chemical and refineries. This industry is growing at an average rate
of 12%. With major expansion in core sector industries such as power, petrochemicals,
oil as well as steel, the valve industry has an ample potential for growth. The other sector
from which demand has been rising is from the water treatment plants, shipyards and
collieries. Another area of potential demand for the valves is the replacement market.
Mechanical control valves, the key actuator in industrial systems, are manufactured in
only three locations worldwide. The first location is the US, and the other two are in
Malaysia and India. In terms of raw material, machining and manufacturing, India and
24. Malaysian costs run neck and neck. Where India scores is design, with a 6% cost
advantage. This makes Indian-produced mechanical control valves the cheapest in the
world. Quite clearly, the country’s mechanical and eletro-mechanical manufacturing base
has improved dramatically with the evolution of its tooling and machining industry. This,
combined with the easy availability of key raw materials such as steel, polycarbonate,
plastics, aluminium and acrylic has given India a competitive advantage.
Valve manufacturing has traditionally been concentrated in certain regions of the country.
A large number of small manufacturers are concentrated in Jalandhar, Agra, Nasik and
Howrah. These units manufacture the entire range of valves but generally concentrate on
valves used in specific sectors like water supply and small and medium sized light
engineering industries.
The diverse and large industrial valves segment faces a stringent quality requirement that
leaves this field to a few major valve manufacturers. Such valve manufacturing facilities
consist of the large companies such as Audco, Alfa Laval, Schrater Duncan, BDK Group
etc. These companies manufacture the entire range of valves with each company having
its own area of specialisation. And the manufacturers are those who have produced
quality goods and built a brand image over the years.
Opportunities
Valve production in India does not have immense opportunities for foreign investment.
This is due to the fact that the replacement market in India is mostly catered by
unorganized or mid size valve manufacturers. However, current industrial developments
in the steel industry and oil & gas explorations will certainly promote foreign
collaborations in technology.
Food & Food Processing Equipment Industry
Food Process Industry: India, world’s second largest producer of food is one of the
most favored destination for investment to many countries in the world.. Food processing
is one of the largest industries in India and accounts for US$29.4 billion as in FY06. This
industry ranks fifth in terms of production, consumption, export and growth prospects.
This industry is estimated to grow at 9-12 per cent, on the basis of an estimated GDP
growth rate of 6-8 per cent, during the tenth five-year plan period. Food processing
industry is highly unorganized. Organised food processing industry is expected to grow at
the rate of 30% in the next five years reaching US$2.4 billion by 2010 from the current
US$674m.
Government Initiatives in attracting Investments: Indian government in order to
attract investment into food processing industry, it has formulated and implemented
several schemes like providing financial assistance in setting up new units and for
modernizing existing units. Food processing industries were included in the list of
priority sector for bank lending in 1999. Automatic approval for foreign equity up to 100
25. per cent is available for most of the processed food items except alcohol, beer and those
reserved for small-scale sector subject to certain conditions.
Food processing equipment: Food process equipment is gaining demand with the
growing investments in food process industry. Food process equipment manufacturing
industry in India is not highly organized, there are no major brands in manufacturing
these equipments. Major medium sized equipment manufacturing units in India are
having collaboration with foreign companies in order to acquire new technologies. There
is absence of high end research facilities in this industry which will help in developing
technologies.
Machinery imports: Excise Duty of 16 per cent on dairy machinery has been fully
waived off and excise duty on meat, poultry and fish products has been reduced from 16
per cent to 8 per cent.
Investment Opportunities: Even though food processing industry is large but share of
food processed to that of total produced is only 32%, this provides good opportunities of
growth to this industry. The Confederation of Indian Industry (CII) estimates that the
food processing sector has the potential of attracting US$33 billion of investment in next
10 years.
FDI inflow in food processing reached US$2,804m in March ’06. In ’05-06, the sector
received approvals worth US$41m. This figure is almost double the US$22m approved in
'04-05.
Informatics Industry/Computers
Information Technology related hardware sales in India have realized its potential when
there was a boom in IT. In the initial period sales of IT hardware like PC, Notebooks,
Printers, Servers and networking equipment was completely dependent on the imports.
However, large scale investments into IT hardware have changed the scenario and
exports have reached a value of around US$1.4 billion by the end of 2005.
PC sales have been experiencing a growth of 25% for the past two years and are expected
to be steady over 30% till 2007. PC sales demand is deriving its demand mainly from the
IT and ITES sectors and also from other industries that are having increasing applications
of technologies creating a new demand which is expected to grow further. PC penetration
in India is only 14 per thousand households; this shows the potential demand that is
existing in the market that needs to be tapped. Exports of desktops has been growing at
25% CAGR for the past seven years (1998-2005), which is poised to grow further with
the entry of new manufacturers.
The printers market can be divided mainly into three segments; Dot-matrix, Inkjet and
Laser printers. The printers market for FY06 has registered a growth rate of 28%, while
sales of Dot Matrix, Inkjet and Laser has grown by 18%, 13% and 128% respectively for
FY06. Market for these printers is expected to grow further with the increasing ERP
26. applications in Industry in order to increase the production levels. Further converting
many manual photographic labs into digital lab has raised the demand for laser printers.
Other IT hardware components like Servers, Networking equipments, UPS, Monitors,
and Keyboards are growing at a compounded annual growth rate (CAGR) of 20%, 10%,
34%, 28% and 28% during 2000-05.
The IT hardware market is projected to grow at much higher levels in comparison to the
present growth trends. These growth trends are projected on the basis of growth in IT and
ITES (IT enabled services) industries, growing applications of IT hardware in other
industries for increasing production efficiency and performance efficiency, growing
awareness towards computer utilization, educational institutions making computer
education mandatory and above all increased internet usage in the country is gradually
creating more and more demand for home PCs.
Opportunities
A great potential for foreign investment lies in this sector. Network equipment,
PCs/notebooks/laptops, etc. will be more in demand. There is enough room for new
ventures manufacturing such items and government’s thrust in IT/ITES export will
further add spurt to the demand for informatics/computers.
Boilers Industry
Boilers are critical high-pressure equipments used in steam/power generation plants. The
Indian boiler industry in FY06 is Rs39.5 billion (US$886.77m) and its production in
India has grown at an average rate of 25.37% for the past five years (FY02-FY06).
Though the production decreased by 1.25% in FY04, it regained its growth by 61.5% in
FY06. Import of boilers has fallen by 6.86% to Rs 65.13crore (US$14.6m) (Excluding
the components of boilers), while boiler exports has increased by 27.57% to Rs 54.3
crore (US$12.19m) for FY06.
The boiler market is divided into two segments power plants and industrial boilers.
Boilers used in power plants are above 200 TPH (tonne per hour of steam), industrial
boilers range between 30 to 200 TPH, where as those that are below 30 TPH are called
process boilers. Boilers can be either oil fired or solid fired (Coal). Choice of boilers
depends on the availability of fuel. Demand for oil, gas and naphtha-fired boilers are high
in Western India, whereas in Tamil Nadu demand is more for bagasse-fired boilers due to
availability of sugarcane. Most of the major companies in boilers have acquired the latest
CFBC (circulating fluidized bed combustion) technology through collaborations. There is
also a growing shift towards co-generation (simultaneous production of electrical power
and thermal energy) boilers.
Bharat Heavy Electricals Ltd (BHEL) manufactures power plant boilers above 200 TPH.
The company has a major share in the market (which is estimated to be more than 65%).
Thermax is the market leader in the small boilers segment (<30 TPH). Power sector
accounts for a large part of the demand for boilers. Indian government initiative in
27. developing infrastructure to sustain the growth rate has allowed the entry of new players
(private) into this sector. Growing investments in the power sector will further increase
demand for the boilers, keeping its growth alive.
Opportunity
High growth power sector envisages a good amount of investment and technology tie-ups
in boilers manufacturing. Industrial boilers (lower capacity) are mostly catered by SMEs
in the domestic market. However, there is a good demand for boilers used in the power
sectors and integrated steel plants.
Sector 2: Machines and Mechanical Devices
Type of Products
The type of products include machines and mechanical devices for thermo-plumping
and air-conditioning, concrete articles production, dishwasher, washing machine,
tumble dryer and industrial use engines.
Use of the Product
Thermo-plumping and air-conditioning products are used as domestic and industrial
appliances. Concrete articles are used in construction industry. Dishwashers, washing
machines and tumble dryers are used in kitchens while industrial use engines
(generators and turbines) are used for electric power generation and/or energy
transformation.
Overview
Machines and mechanical devices have a much bigger scope than indicated in the
above sections – type of products and use of the product. However, for the purpose of
this study, it is restricted to the above categories.
Sub sector: Thermo-plumping & Air Conditioning, Washing Machine (Household
Appliances Industry)
The table given below presents the trends for household appliances.
Trends in Household Appliances
2003-04 2004-05 2005-06
Production (m units)
Refrigerators 3.72 4.36 5.14
Air Conditioners 0.98 1.23 1.47
Window 0.72 0.86 1
Split 0.26 0.37 0.47
Washing Machines 1.36 1.6 1.84
VCR/ VCP 0.14 0.12 0.11
Microwave oven 0.36 0.43 0.5
Production Value (Value in Rs m)
Refrigerators 44,794 50925 55533
28. Trends in Household Appliances
2003-04 2004-05 2005-06
Air Conditioners 41,260 47,860 56,000
Washing Machine 18,420 23,272 29,472
VCR/ VCP 690.57 676.59 669.6
Microwave Oven 4,320 4,730 5,000
Consumer
Electronics 7,518 8,360 9,361
Imports of
Consumer
Electronics 13,284.56 20,784.67 24,417.86
Exports of
Consumer
Electronics 5,247.66 6,136.26 8,188.46
Source: Elcina, Indiastat & Cygnus Research
Sub sector: Concrete Articles Production Machines
This segment includes products such as
• ‘Horizontal’ Concrete Batching/Mixing Plants. (45, 60, 80, 120m3/hr.
capacity)
• ‘Compact’ Concrete Batching/Mixing Plants. (20, 30 m3/hr. capacity)
‘Modular’ Concrete Batching/mixing Plant. (20, 30 ,45 m3/hr. capacity)
• ‘Mobile’ Concrete Batching/Mixing Plant. (12, 15, 18, 20, 25 m3/hr. capacity)
• ‘Reversible’ Mobile Concrete Mixer. (8, 10 m3/hr. capacity)
• ‘Stationary’ Concrete Mixer (10, 12 m3/hr. capacity)
• ‘MKM’ Concrete Kerbing Machine.
• Concrete Block making Machine (Stationary/Mobile)
This segment is dominated by few foreign players such as Schwing Stetter India Pvt
Ltd (a 100 per cent subsidiary of the German based Schwing group of companies).
The high demand for office and residential space in tier-II cities coupled with
emphasis on completion of construction projects within the schedule is set to enhance
the popularity and use of ready mix concrete which in turn would boost the prospects
of companies like Schwing Stetter L&T, Grasim, and ACC are the major players with
a pan-India presence and a market share of 75 to 80 per cent. As of 2006, the country
is dotted with around 140-150 commercial RMC units. This industry employs close to
30,000-35,000 people directly and around 50,000-60,000 people indirectly. The
nascent industry in India is pegged at approximately Rs 20-25 billion, growing
annually at a compound rate of around 25-35 per cent, over the past four to five years.
According to industry sources, the RMC segment churns out, on an average, 28,000-
30,000 cubic meters of concrete everyday..
Sub sector: Industrial Use Engines (Turbines and Generator Sets)
The capacity established for manufacture of various kinds of turbines such as steam
and hydro turbines including industrial turbines is more than 7,000MW per annum in
the country. Apart from BHEL, the public sector unit that has the largest installed
capacity, there are units in the private sector manufacturing steam and hydro turbines
29. for power generation and industrial use. The manufacturing range of BHEL includes
steam turbines up to 660MW units rating; the facilities are available for 1,000MW
unit size. They have the capability to manufacture gas turbines up to 260MW (ISO)
rating and gas turbine based co-generation and combined cycle systems for the
industry and utility applications. Custom-built conventional hydro turbines of Kaplan,
Francis and Pelton types with matching generators are also available indigenously.
AC generators manufactured in India are on par with international ones and
consistently deliver high quality power with high performance. Domestic
manufacturers are capable of manufacturing AC generator right from 0.5KVA to
25,000KVA and above with specified voltage rating.
The imports and exports during 2004-05 were Rs16.76 billion and Rs5.9 billion
respectively.
End-user sub-sectors
Construction Industry
India is witnessing faster growth in its demand for infrastructure and construction
services. Since the existing infrastructure is far below requirement, to maintain the
existing growth rates, the Indian government is increasing its focus towards
developing a strong and sound infrastructure.
In India construction is the second largest economic activity after agriculture which is
estimated to be growing at an average rate of 9.5% during FY02 to FY06. The Indian
construction industry forms around 12.8% of the GDP and 52% of gross fixed capital
formation.
Earlier participation of the private sector in many infrastructural projects was minimal.
Government’s thrust for infrastructure has changed the scenario. It is now focusing on
a private public partnership model (PPP). This has seen a number of private sector
construction players investing in the sector. Infrastructure related construction
industry is centred around roads, ports, power, and real estates development.
Government is following the BOT (Build-Operate-Transfer) model for executing the
projects. This model describes the project is to be executed and operated by the
private players until they recover their investments and earn a profit. Another type of
BOT contract is based on annuity, where the private firm recovers its investments and
earns profits in the form of annuity paid by the government.
Opportunities
According to an industry estimate, India has the potential to absorb US$150 billion of
foreign direct investment in the next five years in infrastructure alone. And a large
part of investment is expected to be diverted towards construction activities.
30. Considering the present growth rate and demand for infrastructure, construction
sector is expected to register higher growth rates in future. Already in airports
(Greenfield and modernization) foreign companies are involved in a partnership with
local companies.
Household Appliances
Market size & growth: Indian household appliances (Consumer durables) can be
segregated into large and small household appliances. The consumer durable market
in India has started experiencing its real growth with the entry of multinationals like
LG Electronics, Samsung, Electrolux, etc. Consumer Durables and Electronics (used
as household appliances) was one of the largest industries in India, with annual sales
of US$5.8 billion in 2005. This industry sale has been growing at a compound annual
growth rate (CAGR) of over 8.3% during 2000-05. Growth in sales value is lower
than the sales volume which is the result of reduction in prices by the companies to
sustain the growth rate in a competitive market.
With a growth in production in the organized segment and domestic availability of
branded products due to lowering of import duties and other liberal economic
measures, the share of unorganized segment has come down sharply to only 8 to 10%
from the previous 40 to 50%.
Growth drivers: Growth in disposable income with the Indian consumer is one major
factor in demand creation where as volatility in prices and credit facilities are other
decisive factors in determining the sales of items. The Indian consumer’s higher
sensitivity to prices has resulted in companies making the pricing method their best
strategy.
Growing Opportunities: A major proportion of population in India though residing in
rural areas, their share of demand for consumer durables is so far only a quarter. The
recent trends of higher growth in demand in the rural areas is an encouraging scenario
for the manufacturers need to have a different strategy for rural areas in order to tap
this high potential market.
Large Household Appliances
Refrigerators
Refrigerators have been manufactured in India since 1950s. Until 1990’s over 90% of
the market was controlled by traditional players, this has changed with the entry of
multinationals after economic reforms in 1990’s. The refrigerators market in India has
been growing at an average rate of 15% for the past five years (FY02-FY06). The size
of the refrigerator market is estimated around 4.5m units in 2005-06. Domestic
penetration of refrigerator is 9%, where urban areas and rural areas account for 75%
and 25% of demand.
31. Air Conditioning Machines (AC)
The annual average growth rate of AC’s currently ranges around 20%. Analysts
expect the annual growth rate to register more than 25% in FY 2007 on the back of
strong sales of split ACs. An AC penetration level in Indian households is only 1%.
The competition in window AC and split AC segment has grown a lot more intense in
the past few years. Consequently, companies have stepped up their advertising and
promotional spends. Technology has also become a differentiating factor. The
reduction in the excise duty in the budget 2006-07, improved the competitiveness of
organised companies vis-à-vis small-scale players. Unorganised players selling
unbranded ACs (assembled) occupy a sizeable market in the household segment.
However, with air conditioners becoming affordable due to lowering in prices, the
size of branded ACs in the Indian market is set to grow.
The import of air-conditioners and refrigerators continues in small quantities mostly
for private use rather than for resale or distribution. Until recently, the importation of
refrigerators was restricted. But foreign firms now are allowed to establish joint
ventures, 100% owned operations to manufacture AC and refrigerator products.
Washing Machines & Microwave ovens
The washing machines market which is an estimated Rs200 billion (US$449m) in
FY06 has recorded an average growth rate of 15% for the last four years. With
growing investments in this market it is expected to register a higher growth in future.
The microwave oven market has been growing at a rate of 16-19%. In this market
both LG Electronics and Samsung, which together account for nearly 60% of the total
market are the market leaders.
Small Household Appliances
DVD Players
DVD player sales which have registered a 28% growth in 2005 is the segment which
has registered the highest growth rate among all other small household appliances.
This growth was achieved from new models introduced in the market which are
having advanced technology applications. Media industry is growing at 7%
compound annual growth rate (CAGR) pushing the demand for DVD players through
its products like movies and songs etc. The country currently is having over five
million home video and DVD subscribers. With the current demand scenario, the
home video segment offers ample growth opportunity. It is expected to grow over
30% in the next five years.
Watches & Clocks
Watch and clock with sales of 22.6mn and 28.4mn have registered a growth of 10 and
8% respectively in 2005. As only one-fourth of the population (currently over 1
32. billion) owns a watch, there is huge untapped potential. Around 40% of this market is
unorganized with most of the major players eyeing on the urban areas leaving the
rural areas for unbranded products. In Rural areas market is occupied mainly by
unorganized sector. Watches and clocks imported from China has main share in rural
market due to its cheaper price range compared to domestic brands. However,
domestic watch manufacturers are also now introducing low price watches targeting
rural markets. Quartz clocks are manufactured largely by unorganized players;
however a few of them could rise to top clock manufacturers and export also.
Opportunities
Large household appliances sector like refrigerators/ACs is having good growth
opportunities. However, Korean giants (LG and Samsung) have already established
themselves in this market. But still at a competitive price if products are offered in the
market with an international tag the scope for new comers still exist.
Commercial Refrigeration
According to Blue Star Ltd and Cygnus Research, commercial refrigeration market
size was in the range of Rs11894 m and Rs12000 m. The table given below gives the
trends for the years FY2004 to FY2006.
Commercial Refrigeration Market Sales (Rs. in
Millions):2003-06
2003-04 2004-05 2005-06 Growth % CAGR2 2002-03
2005-06 003-06
over 2004-
05
Commercial Refrigeration
Cold Storages
Halocarbon refrigeration 500 600 700 16.67 18.32 400
systems only*
Ammonia refrigeration 750 900 1080 20.00 20.00 600
systems only*
Coolers
Drinking water 1100 1300 1680 29.23 23.58 900
Bottled water 450 520 680 30.77 22.93 450
Visi (display type) 2400 3200 4500 40.63 36.93 1600
Bottle (chest type) 650 710 770 8.45 8.84 600
Reach-in refrigerators 23 24 30 25.00 14.21 20
Beverage / juice 115 121 135 11.57 8.35 100
dispensers
Display cases 55 57 60 5.26 4.45 50
Milk 160 168 195 16.07 10.40 150
Chocolate 10 15 20 33.33 41.42 10
Mortuary 25 30 35 16.67 18.32 20
Freezers
Deep (chest type) 900 1050 1150 9.52 13.04 750
Softy ice cream 32 34 58 70.59 34.63 30
34. Sector 3: Moulds
Type of Products
Mould is a container into which liquid is poured to create a given shape when it
hardens. Moulds can be broadly categorised into plastic injection moulds,
compression moulds, investment die casting moulds, blow moulds and pressure die
casting moulds.
Use of the Product
Moulds find usage in automobile, home-appliances, engineering, oil and paint,
refrigerator, irrigation and lighting applications.
Overview
Moulds industry can be broadly categorised into moulds for plastic products and
others.
Moulds for Plastic Products
The chart given below depicts the classification of plastic products by type of mould
processes used.
Approximate consumption of plastic in India according to various processes is as
follows:
Plastic Moulding by Process: 2005
Process % Share in Total Consumption in India
Extrusion 75.6
Injection Moulding 18.0
Blow Moulding 5.1
Rotomoulding 1.3
Total (‘000 tonnes) 4,070
Source: Cygnus Research
35. Domestic
The Indian plastic processing industry is dominated by a large unorganised sector,
which gets excise exemption and other fiscal concessions. In the absence of these
fiscal concessions, the organised sector has not grown significantly and as a result, it
accounts for less than 15% share of the industry.
Exports and Imports
Though Indian exports of plastic products have increased over the past decade, it
continues to account for only a minuscule share in the world trade. The low presence
of the organised large-scale sector and consequently, low economies of scale prevent
Indian players from becoming cost competitive in the international market.
The key plastic products imported include plastic articles, films, sheets and plastic
products for packaging purpose.
Exports and Imports of Plastics and Linoleum products
Rs m 2003-04 2004-05 2005-06
Exports 7,985.24 13,189.09 11,708.21
Imports 4,875.95 6,213.57 8,963.4
Net Exports 3,109.29 6,975.52 2,744.81
Source: CSO
End-user Sub-sectors
Illumination Industry (Lamps and Luminaires)
The Indian lamp industry is estimated to have a turnover of Rs 4700 crore (US$1055m)
in FY06. This industry is experiencing a growth rate of nearly 20% per annum over the
last two to three years. Compact Fluorescent Lamp (CFL) and special kind of
illuminating lamps have registered a higher growth. This industry is having export
volumes that are around 15% of the total turnover. Growing interests of manufacturers
and government initiatives in encouraging exports is expected to increase its percentage
share. A recent surge in lifestyle has created a demand unseen so far for imported lamp
fittings in the upmarket urban areas.
The lamps industry is mainly dominated by MNCs with a market share upto 60% of lamp
production and 40% of luminaries and fittings. This industry is dominated by players like
Philips, GE, Wipro, Osram, Bajaj Electricals Ltd., Crompton and Indo-Asian ruling the
roost.
Electrification on the Indian villages through government schemes like Rajiv Gandhi
Grameen Vidyutikaran Yojana (RGGVY) has been increasing the number of villages that
36. are electrified; this will create a new demand for the lamp industry. Demand for lamps
that are having low power consumption (an example CFL) is increasing steadily since the
power consumed for illumination in India is more than 20% of the total power produced,
where as in developed countries like US it is less than 8% largely due to huge population.
Opportunities
Quite a lot of investment potential exists in this sector. Lamp and lamp fittings are still to
take off more due to a massive boom in retail industry and change in lifestyle and
corresponding investment. More growth prospects are observed in LED and CFL and
luminaries.
Sector 4: Mechanical Designing
Type of Products/Services
It includes mechanical designing, engineering designing, developing prototypes and
final products. This also comprises computer-aided designing and computer-aided
manufacturing.
Use of the Product
These products/services find usage in automobile, telecommunications and
engineering industries.
Overview
India is slowly but surely attracting mechanical designing outsourcing. India's
National Institute of Design churns out hundreds of highly-trained designers every
year. Design firms such as Elephant Design and Lopez get high-end work from their
clients.
As of 2005, India's contract industrial engineering revenue was estimated at
US$500m and by 2010, it is expected to grow to US$10 billion. If we include the
value of embedded software used, the current value of Indian design industry services
is around US$3.25 billion (with embedded software comprising 78% of the figure)
and is expected to grow to US$43 billion by 2015.
Share of VLSI Design, Hardware/board design and embedded software in overall
revenues (India): 2005
VLSI Design US$583m 18%
Hardware/ board design US$139.8m 4%
Embedded Software US$2,530m 78%
Total US$3.25bn 100%
Note: m stands for million and bn stands for billion
37. In 2006, several marquee brands have invested in new design operations in India or
significantly expanded existing facilities. These companies include Agilent, Via, Dell,
Rambus, Windriver, Wolfson, Austria Microsystems, Tensilica and Sandisk. Not only
are the captive design units expanding at a furious pace, third-party outsourced design
service providers based in India are also on the go. Companies like Wipro have even
made overseas acquisitions to beef up their design service offerings.
End-user Sub-sectors
Optical Instruments
Optical instruments are used in industrial laboratories (like textile, steel, metallurgical
industries), educational Institutions (inclusive of medical and engineering colleges),
government run scientific research institutes and companies where R&D and testing
operations are performed like pharmaceuticals and biotechnology. The Indian Optical
instrument industry even though not new in India is controlled mainly by small &
medium enterprises. Presence of big brands in this industry is seen only in certain
products manufacturing.
Growing requirement for technically advanced optical instruments is forcing the end
users to import them because the instruments manufactured by Indian companies are not
meeting their technical requirements. Many Indian optical instrument manufacturers in
order to utilize the growing demand for advanced technical instruments are acquiring the
technology by forming joint ventures with some leading foreign companies. As a result
many Indian manufacturers in the recent years are increasing their product varieties and
efficiencies and increasingly becoming export oriented. Percentage of optical instruments
exported by Indian companies to the developing countries has increased from 5.3% in
1995 to 7.6% in 2004. There are big branded multinationals like Canon which are into
manufacturing, specific range of high end optical instrument products.
Demand for the optical instruments is increasing with growing quality norms- which are
making companies to have stringent testing facilities and growing educational
institutions- resulting in an increase in laboratory requirements. Increasing Investment in
healthcare services is creating a higher demand for optical instruments. But still the
Indian optical instrument manufacturing industry has to come up with more high end
products in Indian market.
Opportunities
Increasing number of modern laboratories in India evokes a requirement of improved
technology based optical instrument manufacturing base. Therein lies the opportunity for
foreign companies to come to India and invest in the industry.
38. Sector 5: Iron and Steel Industry
Overview
Indian iron and steel industry can be broadly divided on the basis of stages of production:
one being the iron ore miners and the rest being the steel producers who manufacture
steel from iron ore. Ore miners engage in mining activities while the steel producers are
further classified into primary producers and secondary producers. The primary
producers are further divided on the basis of method of production used for making steel.
They are Blast furnace method, Electric Arc furnace (EAF) and Corex method. The
secondary producers are re - rollers and stand alone producers. The stand alone producer
can further be segmented into pig iron and sponge iron manufacturing units.
Iron ore Industry
Iron ore is the main raw material used in steel production; growth in demand for steel is
increasing the demand for iron ore, whose prices in the recent times has shot up along
with other raw materials like coal. India's iron ore reserves are estimated to be at 24
billion tonnes, of which a major portion has a rich iron content of about 65% as compared
with Brazil's iron ore reserves which have 66% iron content. Iron ore production in
India has been increasing steadily from 2003-04 onwards and has shown an
estimated growth rate of 17.29% (CAGR) from 120.6mmt in 2003-04 to 165.9mmt in
2005-06. The demand for iron-ore is estimated to have increased by 12.9% (CAGR) from
52mmt in 2003-04 to 66.3mmt in 2005-06.
Sponge Iron: With the growing scarcity of scraps used in steel manufacturing largely by
secondary units lots of sponge iron manufacturing facilities have been installed in India
in the recent past. India is the world’s largest producer of sponge iron. The growth of
sponge iron production has been estimated to have increased by 18.4% from 10.30m
metric tonnes in 2004-05 to 12.2m metric tonnes in 2005-06. Presently there are 227
sponge iron units installed in the country having a capacity of 18.65m metric tonnes per
annum. Out of these, there are 204 coal-based units in operation with a capacity of
12.55m metric tonnes per annum. There are three gas-based units covering a capacity of
6.10m metric tonnes per annum.
Pig Iron: India is a net exporter of pig iron with exporting to countries like South Korea,
Thailand, Iran & Malaysia. Pig Iron has seen substantial growth during the past few years.
Post-liberalization production of pig iron has increased from 1.6m metric tonnes in 1991-
92 to 3.85m metric tonnes in 2005-06.
Production of Pig Iron (m tonnes)
Main Secondary Grand Production
Year
producers producers total Capacity
2000-01 0.96 2.15 3.11 4.5
2001-02 1.02 3.05 4.07 6.0
2002-03 1.11 4.18 5.29 6.0
2003-04 0.97 4.25 5.22 6.0
39. 2004-05 0.621 2.55 3.171 6.0
2005-06
(Apr-Oct) 0.173 0.425 0.598 6.0
Estimated
Source: Ministry of Steel, Government of India
Steel industry: This has been one of India’s oldest industries, contributing to the
country’s economy to a large extent. India with its 3.37% share in global steel production
in 2005 became the eighth largest producer of crude steel in the world. Its crude steel
production grew by 16.9% from 32.6m metric tonnes in 2004 to 38.1m metric tonnes in
2005 and finished carbon steel production grew by 10.66% over 2004 to 40.05m metric
tonnes in 2005. Consumption of finished carbon steel in 2005 stood at 34.39m metric
tonnes, which is an increase of 10.33% from 2004. The demand-supply gap remained
steady from 2003-04 to 2004-05 at around 5.6m metric tonnes but in 2005-06, it has been
estimated to have fallen by 24.8% to 4.26m metric tonnes The domestic demand for steel
is expected to grow at a CAGR of 4.04% during 2006-09. The main reasons for growth in
consumption of steel are the growth in infrastructure, construction, transportation and
consumer durables in which steel is consumed as a major raw material.
Steel is exported and imported by India since long. For the last three years, there has been
a rising trend in the imports, which grew from 1.51m metric tonnes in 2003 to 2.1m
metric tonnes in 2005, with a CAGR of 17.93%. India’s steel exports have declined by
16.1% from 5.22m metric tonnes in 2004 to 4.38m metric tonnes in 2005. The main
reason for an increase in steel import is a growth in the automobile sectors mainly by the
foreign manufacturers who produce vehicles and as a result import steel in huge
quantities.
The government plays a very crucial role in determining domestic steel prices. Although
it does not directly decide the prices and regulate the industry, it acts as an enabler of
prices.
SAIL is the largest steel producer in the country among the state owned companies. Other
large private players in integrated steel manufacturing are Essar Steel, JSW Steel Ltd., etc.
The performance of the domestic major players has been robust in the last three years.
The outlook for the coming years is equally positive. Growth prospects in the steel
industry are also attracting global steel manufacturers. Two global steel giants Mittal and
POSCO have signed a MoU with the Orissa state government to establish their
production facility that signifies an important step for the Indian steel industry.
Steel Products: Based on the shape and size, steel is classified into long products and flat
products. Long products include bars, wire rods, structural products and railroad sections.
They are used in construction and heavy engineering. Flat products include HR coils/
sheets, CR coils/ sheets and galvanised sheets. HR coils/sheets are primarily used for
making pipes. CR coils/sheets are used in automobiles (cars, scooters, and motorcycles),
white goods, and consumer durables. Galvanised sheets are used mainly in roofing,
panelling, automobile bodies and trunks/boxes.
40. Demand for flat and long steel products in India for 2005-06 is estimated to be around
21.83m metric tonnes and 16.28m metric tonnes. Production capacity for flat and long
steel products was 22m metric tonnes and 25m metric tonnes. Future demand for the steel
products is expected to increase because of the growth in economy which is resulting in
higher investments in sectors where steel products are used as raw materials.
Finished Carbon Steel
Production of Finished Carbon Steel (m tonnes)
Main Secondary Grand Capacity
Year
Producers Producers Total (Approx)
2000-01 12.51 17.19 29.7 35
2001-02 13.05 17.58 30.63 39
2002-03 14.39 19.28 33.67 39
2003-04 15.19 21.00 36.19 40
2004-05 15.575 22.825 38.400 42
2005-06 (Apr- 7.914 12.91 20.824 45
Oct)
Source: Ministry of Steel, Government of India
Steel products such as bars and rods, plates, hot rolled coil (HRC), cold rolled coil
(CRC) and GP/ GC fall in the finished steel category. The production of finished
carbon steel in the country totalled 29.7m tonnes in 2001-02, compared to 14.33m
tonnes in 1991-92.
Sales
The sales of finished carbon steel increased from 14.84m tonnes in 1991-92 to 27.35
tonnes in 2001-02. The table given below presents sales of finished steel during the
fiscal years 2000-06. The wide fluctuations in sales growth show that the demand for
steel in the country is erratic.
Sales of Finished Steel (m tonnes)
Month Bars and HR coils/ HR sheets CR coils/ GP/GC Finished steel
rods sheets sheets sheets
2000-01 10.53 9.50 0.52 4.54 1.78 26.87(7.44*)
2001-02 11.00 8.62 0.65 4.90 2.18 27.350 (3.1*)
2002-03 11.36 9.05 0.54 5.21 2.737 28.897 (5.6*)
2003-04 11.97 9.58 0.59 5.34 2.848 30.328 (5*)
2004-05 12.84 10.08 1.03 6.11 3.294 33.354 (9.97*)
2005-06 1.90 1.49 0.15 0.91 0.507 4.957
(Apr-May)
* Indicates percentage increase in production over previous year
Source: Ministry of Steel, Government of India
41. Imports & Exports
Steel is classified in the international market mainly into two standards: American
Iron and Steel Institute (AISI) classification, and Unified Numbering System (UNS)
classification. Both these systems use a series of 4-5 digits to classify according to the
primary alloying element, the approximate content of the primary alloying element,
and the approximate carbon content. In addition, there is the American National
Standard Institute (ANSI) classification, which mainly deals with finished steel
products. As research indicated that carbon-free steel is non existent, low-carbon steel
is considered as carbon-free steel in this report.
Exports
Although steel exports began in 1964, substantial growth in export of finished steel was
witnessed only in the post-liberation period. Steel exports increased from 0.9m tonnes (Rs70
billion) in 1992-93 to 3.4m tonnes (Rs258 billion) in 1997-98, overtaking sectors such as
electronic goods and human-made fabrics. There has also been a qualitative change in the
export of steel items. Earlier, export consisted mainly of plates, bars and rods and structural.
Now steel exports comprise semis, hot-rolled coils, cold-rolled coils and galvanised sheets.
The prominent export destinations for steel include the US (16.34%), Italy (7%), Spain
(4.43%), South Africa (2.14%), Korea (2.7%), Iran (2.26%), Malaysia (2.06%), the
Philippines (1.55%) and the UK (1.29%).
Exports of Steel
Percentage Share of total value
Total Total
Year Steel Value High Low Finished
Pig Stainles
(m tonnes) (Rs bn) carbon Semis Carbon Carbon
Iron s Steel
Products Steel Steel
2000-2001 3.000 51.745 1.3 7.7 6.5 4.3 0.01 80.199
2001-2002 3.242 44.831 2.88 7.5 8.3 2.6 0.06 78.66
2002-2003 4.966 92.540 0.5 12.6 9.2 1.7 0.03 75.97
2003-04 5.922 1,19.068 8.99 9.2 11.8 1.7 0.17 68.14
2004-05 4.777 1,83.180 1.66 3.7 4.7 1.9 0.14 87.9
2005-06 4.637 1,77.811 - - - - - -
(Apr-
October)
Source: DGFT, Cygnus Research
42. Imports
This sector has been freed from import licensing, and the import duty is lower. On an
average, India has imported 1.64m tonnes of steel every year in the last five years. Following
are some of the leading suppliers of iron and steel to India: Russia (11.19%), Japan (6.16%),
the US (5.9%), Germany (5.3%), China (3.7%), Romania (3.25%) and Belgium (2.7%). Steel
imports largely comprise sheets, bars and rods.
Import of Steel
Total Percentage Share
Total
Steel High Low Finished
Year Value Pig Stainless
(m carbon Semis carbon Carbon
(Rs bn) Iron Steel
tonnes ) Products Steel Steel
2000-01 1.632 436.960 0.007 0.12 0.12 0.78 0.10 97.97
2001-02 1.375 536.429 0.001 0.14 0.13 1.37 0.32 98.039
2002-03 1.510 536.542 0.002 0.07 0.20 0.88 0.40 98.448
2003-04 1.650 815.531 0.0003 0.12 0.21 1.42 0.54 97.707
2004-05 2.050 1,465.562 0.0001 0.34 0.64 0.9 0.48 97.639
2005-06 1.438 1,028.06 - - - - - -
(Apr-
Oct)
Source: Ministry of Steel & Cygnus Research
Opportunities
Indian steel industry has a good potential with low per capita consumption of 32kg. In
order to meet the growing domestic and international demand, the government has
formulated a National Steel Policy, which has a target of 100m metric tonnes of steel
production by 2020.
Entry barriers to steel industry include capital expenses, long gestation period,
unavailability of raw material, over supply situation and minimum economic size; each
one of them impacts the investment decision.
Looking to the current flow of foreign investment and upsurge in demand for automobile
and components along with white goods investment in either green field steel
manufacturing or steel related industries look really up.
