1 indian engineering sector

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Greaves : An Analysis of Product Quality

& Customer Satisfaction

1.1 INDIAN ENGINEERING SECTOR

The Indian engineering industry forms the crucial backbone ofthe economy and is intricately linked with umpteen other coresectors for its demand. The engineering industry derives its demand

from capacity creations in core sectors viz., power, infrastructure,mining, oil and other several other sectors including generalmanufacturing sector, consumer goods industry, automotive andprocess industries. A slowdown in the economy affects theengineering sector much before it affects other sectors. However inan economic upturn this industry picks up last as various sectorslike steel, petrochemicals, automobiles need to perform well beforethey make capital investments for capacity expansions. So it is thefirst one to be hit in case of an economic down turn and last one torecover in case of an economic upturn.

Indian engineering industry is a diverse industry with a numberof segments and can be broadly classified into two sections namelyheavy engineering and light engineering:

IndianEngineering

Sector

1.1.1 HEAVYENGINEERING INDUSTRY

The Heavy Engineering Industry comprises of capitalgoods/machinery and equipment and transport equipment sub-segments. In capital goods/machinery and equipment sub-segment,there are two-sub segments namely electrical and non- electricalmachinery. The electrical machinery comprises power generationand transmission and distribution equipment like motors andgenerators, switchgears, transformers and energy meters. The non-electrical machinery segment comprises engines of all types,

HeavyIndustry80%

LightIndustry20%

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material handling equipment, machine tools, textile machinery,printing machinery earthmoving machinery boilers, turbines, high-end industrial pumps, high-end industrial compressors,environmental control equipment and fire protection systems.

Transport Equipment segment comprises of passenger cars, HCVs,

LCVs, MUVs, two wheelers and three wheelers.

1.1.2 LIGHT ENGINEERING INDUSTRY

The Light Engineering Industry is a diverse industry with anumber of distinctive sectors and sub sectors. This sector includeslow-tech items like castings, forgings and fasteners to the highlysophisticated microprocessor based process control equipment anddiagnostic medical instruments. This group also includes industrieslike bearings, steel pipes and tubes etc. The products covered under

the light engineering industry are largely used as input to the capitalgoods industry. Hence the demand of this sector depends on thedemand of the capital goods industry.

1.2 ADVANTAGE INDIA

Skilled technical manpowerCompetitive labor costManagerial excellence to deliver quality goods on time.Indigenous availability of raw materials

Over 2500 companies have ISO 9000 certificationLarge domestic market allowing economies of scaleStrategic location allowing exports to near and far countriesDiversified industrial base with supporting ancillary industriesStrong technological capabilities exist, particularly in certainsectors such as electrical machinery, process plantmachinery and general-purpose machineryMany leading world-class companies have manufacturing base

in India

GM, GE, Ford, Caterpillar, etc.-USToyota, Sony, Honda, LG, Hyundai -East AsiaSiemens, Philips, Daimler Chrysler, Fiat, Lafarge -

Europe

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1.3 GROWTH OF THE INDUSTRY

The Indian capital goods sector has shown a dramaticturnaround in the last 20 months. The economy is buoyant with theGDP growth rate projected at 8.4%. As a result key end userindustries have seen a revival in fortunes.

Key Growth Drivers

Domestic revival - Revival of industry, the key end user sector,has boosted the performance of the capital goods industry.

Pick up in infrastructure spending Another key determinant ofthe demand for capital goods is the gross investment undertaken inthe economy. Governments emphasis on power and constructionsector has seen increased demand for capital goods.

Outsourcing story- Engineering companies exhibit huge potentialfor direct exports and outsourcing. Global manufacturing companiesare preferring India as an outsourcing destination due to its lowerlabor cost and better designing capabilities.

Following are the Sales, Net profit, EPS, P/E of some of the topcompanies of India for the year 2003, 2004 & projections for theyear 2005.

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1 indian engineering sector

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