8 Industry Overview Section A: Auto Components Industry The Indian auto components industry is one of the fastest growing industries in the country. It has grown at a CAGR of 26.2% during the last ve years ended 2011-12. The industry has a distinct global competitive advantage in terms of cost and quality and this has aided in its transformation from a local supplier to a global auto parts supplier catering to some of the big names in th e global automobile industry . The cost adv antage stems from the cost -competitiv eness in raw material and labour, while its established manufacturing base is a compelling araction for global Original Equipment Manufacturers (OEMs) to outsource components from India. The industry is transforming itself from a low volume highly fragmented industry into a competitive industry backed by competitive strengths, technology and transition up the value chain. The Indian auto component industry is estimated to be around `2,063 billion as of FY12, almost thrice the size in FY07. Chart 2.1: Indian Auto Components industry Source: Automotive Component Manufacturers Association of India (ACMA)Several factors have enabled this transformation of the Indian auto components industry. Government’s role has been in the form of initiatives and incentives, additional subsidies and formation of various clusters as also economic liberalisation. The gradual increase witnessed in the per capita income in India has led to leading aspirations and greater demand for automobiles, which in turn has boosted the demand for auto components. In addition, the entry of various foreign players in the Indian market led to companies adopting innovative marketing strategies to fend competition. The competitive intensity led to the improvement in end products. Industry Structure The Indian auto components industry can be broadly classied into the organised sector and the unorganized sector. There is a clear demarcation with respect to products in these two sectors, the organized sector caters to high value-added precision engineer ing products and accounts for around three fourth of the total production. The unorganized sector caters to the lower value-added segments. The organized players cater to the original equipment (vehicle) manufacturers, while the unorganized sector largely caters to the aermarket. There are around 600 players in the organized sector accounting for around 70% of the industry’s total revenues. Chapter II
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8/12/2019 Industry Overview - Automotive Components
Exports of auto components from India have doubled during the last 5 years from ` 15,960 crore in FY08 to an estimated
` 33,485 crore in FY12. Exports constitute 17% of the Indian auto components industry’s total turnover. Exports declined
during FY10 primarily due to slow recovery in developed countries. However, they once again bounced back in FY11,registering sharp growth more than 45%. Europe accounted for nearly 32.9% of India’s exports and continues to be one of
the major export destinations, followed by Asia.
Chart 2.5: Auto components – Major Destinations – FY12 (%)
Source: ACMA
In addition, in recent years the structure of the customer base in the global markets has also undergone a major change. In
the 1990s most of the exports were made to the international aermarket whereas at present most of the exports are made
to the global OEMs and Tier 1 companies. During FY10, global OEMs/tier-I manufacturers accounted for 80% share in the
Indian auto component industry’s exports and global aermarkets accounted for the rest.
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Exhibit 2.2: SWOT analysis of Indian auto component industry
Source: D&B Research
ChallengesThe growth prospects for the industry are bright, however to continue to report healthy growth the industry has to overcome
certain challenges facing them. The challenges include:
Technological capability not enough to match global standards•
Surging raw material prices puing pressure on prot margin•
Slowdown in global economy aecting exports•
Players losing bargaining power with larger OEMs•Increasing rivalry among players with numerous small rms targeting the same customer segments•
FTAs signed with other developing countries increasing bulk imports of cheaper auto components.•
Infrastructure challenges – Roads, Ports & power•
R&D Competence•
Raising capital and scaling capacities•
OutlookThe Indian auto components industry is well poised to achieve strong growth in coming years owing to rising domestic
demand in the OEM market and expanding replacement market. The export market for auto components is also likely to
see strong traction once the global market stabilises and the economic uncertainty diminishes.
According to the Auto Components Manufacturers Association (ACMA), the Indian auto components industry is likelyto grow to US$ 110 billion by 2020 with the domestic market share of ~US$ 80 billion. The share of the auto components
industry in the country’s GDP is likely to increase to 3.60% by 2020, up from 2.40% in FY12. Given good long term demand
prospects in the domestic market and with India emerging as a favoured low-cost sourcing destination, auto component
manufacturers are likely to invest in increasing production capacities and technological capabilities. Further, companies
would continue to diversify their product portfolio to de-risk their businesses. However, competition is expected to increase
and prices of raw material are likely to follow an upward trend. This is expected to exert pressure on the industry’s prot
margins. In such a scenario, cost control programmes would assume greater signicance for the industry players, both big
and small.
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The engineering sector is one of the largest industrial sectors in India. The sector has witnessed growth in recent years
driven by increased investment in industrial production and infrastructure development. India has strong engineering
and capital goods base, catering to a wide range of industrial machinery. The engineering industry plays a vital role in the
development of other industrial sectors in the country.
The sector provides direct and indirect employment to over 4 million skilled and non-skilled workers in the country.
Engineering sector can be broadly categorised into two segments: Heavy engineering and light engineering. Engineering is
relatively less fragmented at the top and more fragmented at the lower end, in terms of technology and capital investment
and are dominated by comparatively smaller players.
The major end-user industries for heavy engineering goods are power, infrastructure, steel, cement, petrochemicals, oil
and gas, reneries, fertilisers, mining, railways, automobiles, and textiles. Light engineering goods are essentially used as
inputs by the heavy engineering industry.
Key factors driving growth in the domestic engineering industry
• Growth in the key user-industries
• Government’s thrust on power and construction• Global companies preferring India as an outsourcing hub owing to the labour arbitrage advantage and beer design
capabilities
Growth in the domestic engineering industry has been powered by user industries and several new projects undertaken
in various core industries such as railways, power and infrastructure. Capacity creation in sectors such as infrastructure,
oil and gas, power, mining, automobiles, auto components, steel, renery and consumer durables drives growth in this
sector.
Table 2.6: Classication of Heavy and Light Engineering sub-segments
Heavy engineering industry Light engineering industry
Textile machinery Rolling bearingCement machinery Medical and surgical instruments
Sugar machinery Process control instruments
Rubber machinery Industrial fasteners
Material handling equipment Ferrous castings
Oil eld equipment Steel forgings
Metallurgical Seamless steel pipes and tubes
Mining machinery Electrical resistance welded (ERW) steel pipes and tubes
Dairy machinery Submerged-arc welded (SAW) pipes
Machine tool Bicycle
Source: Ministry of Heavy Industries & Department of Industrial Policy & Promotion
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I. Heavy Engineering SectorThe heavy engineering sector can be classied into two broad segments: Capital goods/machinery (which is further classied
into electrical machinery/equipment and non-electrical machinery/equipment) and equipment. Electrical machinery
includes: power generation, transmission and distribution equipment such as generators and motors, transformers and
switchgears. Non-electrical machinery comprises machines/equipment used in various sectors such as material handling
equipment (earth moving machinery, excavators, and cranes) and boilers.
Table 2.8: Growth in production of key heavy industries (%)
Key heavy industries Growth in Production (FY12 over FY11)*Machine tools 18.27
Boilers 26.91
Electric motors 11.73
Rubber transmission and V belts 18.85
Electric welding machines -7.33
Power distribution transformers 25.71
Commercial vehicles 25.89
Passenger cars 1.71
Relays, fuses and switchgears -10.92
Air break switches / circuit breakers 25.99
Earth moving machinery 26.88
Cranes -14.68
Agricultural machinery 7.93
Engines incl. internal combustion and diesel engine 6.93
Construction machine/equipment -5.45
Industrial chains 30.75
Industrial blowers -7.32
Generator/alternator 1.82
Turbines & accessories 10.56
*Apr-Nov
Source: Department of Heavy Industries
Heavy Electrical and power plant equipmentFortunes of the Indian heavy electrical industry have been closely linked to development of the power sector in India. The
heavy electrical industry comprises of power generation, transmission and distribution as well as utilisation equipment.
These include turbo generators, boilers, turbines, transformers, switchgears, Transmission Line Towers, Motors (FHP,
LT, HT & DC), AC Generators, Conductors, Capacitors, Cables, Energy Meters, and other allied items. etc. This electrical
equipment (transformers and switchgears) is used by most sectors. Some of the major areas where the equipment is used
include power generation projects, petrochemical complexes, chemical plants, integrated steel plants, and non-ferrous
metal units.
Demand for heavy electrical and power plant equipment (market size) has risen at a CAGR of 15.5% during the six years
ended FY11. During this period, domestic production grew at a CAGR of 14.1%, while imports grew at a CAGR of 22.8%.Imports cater to the around 37% of the requirement in the supercritical segment for BTG equipment, while in the subcritical
segment it accounts for around 26%.
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Chart 2.7: Heavy Electrical and power plant equipment (` cr)
Source: Report of the working group on capital goods and engineering sector for the 12th Five-year Plan
There are about 675 manufacturers of electrical machinery in India including Heavy electrical power generation Equipment
like Boiler, Turbine & Generator sets. Nearly 90% of them are small & medium manufacturers. PSU named BHEL is the
major manufacturer of electrical and power equipment.
SMEs in the heavy electrical segmentNumerous companies have ventured into manufacturing of power equipment owing to the Government of India’s thrust
on power. The power equipment industry has a number of SMEs operating in fragmented segments such as manufacture of
transformers, power cables and conductors. However, the industry continues to be dominated by organised players in the
manufacture of heavy electrical equipment, which requires higher technological capabilities and capital investment.
In power equipment, transformers are one of the most fragmented segments, with numerous SMEs involved in the
manufacturing of transformers. The Indian transformer industry exports to more than 50 countries including the US,
Europe, South Africa, Cyprus, Syria, Iraq, and the Far East countries.
Classication of heavy electrical industry:
Turbines and Generator Sets• : The Indian industry has established a manufacturing capacity of various kinds ofturbines of more than 7,000 MW per annum. The PSE Bharat Heavy Electricals Ltd (BHEL) has the largest installed
capacity. There are units in the private sector also which manufacture steam and hydro turbines for power generation
and industrial use. Domestic manufacturers of AC generators are capable of manufacturing AC generator from 0.5
KVA to 25,000 KVA and above.
Boilers• : The Indian boilers industry has the capability to manufacture boilers with super critical parameters upto
1,000 MW unit size. BHEL is the largest manufacturer of boilers in the country, with over 50% market share. It has
the capability to manufacture boilers for super thermal power plants, apart from utility boilers and industrial boilers.
Transformers: The domestic transformer industry has the capability to manufacture the whole range of power and•
distribution transformers. Special types of transformers required for furnaces, rectiers, electric tract, etc, and series
and shunt reactors as well as HVDC transmission upto 500 KV are also being manufactured in India. The Indian
transformer industry exports to various countries including the US, Europe, South Africa, Cyprus, Syria, Iraq and Far
East countries.Switchgear and Control Gear• : The switchgear and control gear industry in India is a fully developed one, producing
and supplying a wide variety of switchgear and control gear items required by the industrial and power sectors. The
entire range of circuit breakers from bulk oil, minimum oil, air blast, vacuum to SF6 are manufactured to standard
specication. The range of products produced cover the entire voltage range for 240V to 1000KV, switchgear and
control gear, manual circuit breakers, air circuit breakers, switches, rewireable fuses and high rupture capacity fuses
with their respective fuse bases, holders and starters.
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Electrical Furnaces• : Electrical furnaces are used in metallurgical and engineering industries such as forging and
foundry, machine tools, automobiles, etc.
Shunting Locomotives• : Shunting locomotives for internal transport facilities are essentially used in railways, steel
plants, thermal power plants, etc.
Textile machineryThe Indian textile machinery segment comprises more than 1,446 machinery and components manufacturers and 598 units
producing complete machinery and 848 units make parts and accessories. 80% of them are small & medium manufacturers.
Major textile machineries include weaving machine, spinning machine, winding machine, processing machine, synthetic
bre machine, textile testing instruments, etc.
The global market crisis that hit the textile industry in 2009 had a serious impact on the Indian textile machinery segment
as well. Demand (market size) for textile machinery grew at a slow pace of 2.9% during the six year period ended FY11
to ` 10,500 crore. Share of domestic production in total market has risen over the last few years, however over 40% of the
demand for textile machinery is catered by imports.
Chart 2.8: Textile Machinery (` cr)
Source: Report of the working group on capital goods and engineering sector for the 12th Five-year Plan
TUF Scheme a boon for textile machinery manufacturersTechnology Upgradation Fund Scheme (TUFS), the agship programme of the Ministry of Textiles, has aracted investments
in the textile sector. It has infused an investment climate in the textiles sector and in its operational life span has propelled
investment of more than ` 20.77 bn (up to June 2010). The textile machinery industry has beneted substantially from the
TUFS scheme for expansion and modernisation of textile mills. The total fund of ` 80 bn, which was allocated under the
TUFS scheme in the Eleventh Five Year Plan (2007-2012), has been utilised completely in just three years.
Material Handling EquipmentUnder the heavy engineering segment, the Indian material handling equipment industry has a number of units present in
the SSI sector, manufacturing equipments such as stackers, reclaimers, ship loaders/unloaders, wagon tipplers and feeders
catering to core industries such as coal, cement, power, port, mining, fertilizers and steel plants.
Earth moving and mining equipmentCurrently 20 large & global manufacturers and nearly 200 small & medium manufacturers of Earthmoving & mining
machinery are present in India. The product range comprises of Backhoe Loaders, Compactors, Mobile Cranes, Pavers,
Supported by the accelerated economic growth from the year 2003 onwards, construction and mining machinery sector has
grown by leaps and bounds to sustain rapid expansion happening in infrastructure and core sectors projects.
Construction and Mining industries in India have exported a wide range of machinery to countries in Africa, Indonesia,
Malaysia and South America and the value of export is about ` 228 Crore during 2010-11.
Machine Tool IndustryMachine tool is another heavy engineering segment dominated by SMEs in terms of number of companies. Out of 800
manufacturers of machine tools and its parts most are SMEs, about 25 units are mid-size manufacturers which have annual
turnover varying between ` 200 - 300 crore each. Coimbatore is one of the major manufacturing hubs of the machine tools
industry. The machine tool industry manufactures the entire range of metal-cuing and metal-forming machine tools; and
variants of robotics, handling systems and TPM-friendly machines. Type of machine tools currently manufactured in India
are General/Special Purpose Machines, Standard CNC machines, Gear cuing, Grinding, Medium sized machines, EDM,
Presses, Press Brakes, Pipe Bending, Rolling, Bending, Measuring, metrology and gauging, etc.
Although machine tool manufacturers produce general purpose machinery of international standards in terms of quality,
precision and reliability; they lag in terms of design and engineering capabilities to manufacture high precision CNC
machines. It is a highly fragmented industry with growth in the industry being demand driven, coming from various
sectors such as automobiles, engineering, defence, textile machinery and aviation.
The import content is 30% in domestic production for standard machine tool and 40% in high technology machine tools.
The market size of the machine tools industry has grown at a CAGR of 16% during the ve years ended FY11 to ` 10,236
crore. During this period, domestic production grew at a CAGR of 12%, while imports grew by 20%.
Chart 2.9: Machine tools industry (` cr)
Source: Report of the working group on capital goods and engineering sector for the 12th Five-year Plan
Cement Machinery IndustryThe Indian cement machinery industry manufactures complete cement plants, based on dry processing and pre-calcination
technology, for capacities upto 7500 TPD. The existing installed capacity of the industry is estimated to be ` 6 bn per annum.
According to the Ministry of Heavy Industries, presently there are 18 units in the organised sector for the manufacture ofcomplete cement plant machinery.
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Source: Report of the working group on capital goods and engineering sector for the 12th Five-year Plan
Engineering goodsDemand (market size) for engineering goods grew at a CAGR of 14.9% during the six years ended FY11. Production grew
by 13.4% while imports rose by around 25.5%. Most of the requirement (~90%) for engineering goods is met through
domestic production. Engineering goods considered for the report are Bearings, Steel pipes and tubes, Seamless pipes andtubes, Nuts, Bolts, Rivets etc., Castings, Forgings, Metal Containers including cylinders, Steel wires and ropes, Engines,
Pumps, Compressors, valves & actuators, gears, etc.
Chart 2.12: Engineering Goods (` cr)
Source: Report of the working group on capital goods and engineering sector for the 12th Five-year Plan
Dies, Molds & Tools industryIndian toolroom industry is very fragmented and consists of more than 500 commercial tool makers engaged in design,
development and manufacturing of tooling in the country. In addition to commercial tool makers, 18 Government toolroomscum training centers are also operating in the country. The key commercial toolroom locations are Mumbai, Bangalore,
Chennai, Pune, Hyderabad and NCR.
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Source: Report of the working group on capital goods and engineering sector for the 12th Five-year Plan
II. Light Engineering IndustryA majority of the SMEs operate in the light engineering industry, comprising low-tech items such as castings, forgings,
fasteners, bearings, steel pipes and tubes. Although SMEs are known to dominate the low-technology segment in engineering,
a few SMEs also manufacture niche high value-added products. For a few SME engineering enterprises, manufacturing isrestricted to assembly of imported components.
Most products in light engineering serve as inputs for capital goods industry. Therefore, the industry’s nancial and
operational health is linked to demand for capital goods. In fact, in light engineering, a number of products such as all
types of fasteners (except high tensile and special purpose fasteners), conventional hand operated sewing machines, bicycle
parts and other components are reserved for the SSI sector.
Table 2.9: Snapshot of Key Segments in the Light Engineering Industry
% Growth in Production (FY12 over FY11)*
Bearings (Ball/Roller) industry 7.94
C.I. castings 6.29Steel castings 39.67
Food processing machinery -3.48
Fluorescent tubes -9.79
Hose pipe -28.71
Fasteners(high tensile)/bolts& nuts 6.96
PVC pipes and tubes 5.89
Aluminium tubes/pipes 9.63
Spun pipes 1.77
Stampings & forgings 13.16
Bicycles 4.11
Bicycle parts 8.63
Tube, truck 6.61
Medical and surgical equipment (except x-ray) -15.03
* Apr-NovSource: Department of Industrial Policy & Promotion
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SMEs have a signicant share in the steel forgings industry with a number of units functioning in this tiny segment. These
SMEs have upgraded their facilities in terms of technology and quality and some of them supply to Original Equipment
Manufacturers (OEMs) in the automobile sector.
Traditionally, for SMEs, major impediments to growth have been high cost of credit and non-availability of raw material at
competitive rates. SMEs also lag behind in technological capabilities, with a wide gap between technology in the domestic
turf and at international levels.
The major sub-segments within this industry are:Medical and Surgical Instruments: The medical and surgical instruments segment includes a wide array of equipment and
apparatuses. These include medical and surgical instruments, dental equipment, electro-medical apparatus, orthopaedic
appliances, physiotherapy equipment, X-ray machines, among others. These instruments nd application in diagnosis,
therapy and patient monitoring and thus play a crucial role in the healthcare delivery system.
Output of the Indian medical and surgical instruments industry was very small until a few years back. In recent years,
liberalisation and growing health awareness has accelerated the growth of the domestic industry and also led to a rise in
imports of medical and surgical instruments into India. Domestic production comprises of wide range of medical equipment
among others. Demand for sophisticated instruments such as nuclear magnetic resonance (NMR) scanners, multi channel
monitors, among others are met through imports. Majority of the end-users prefer to deal with foreign companies, as
Indian manufacturers who are concentrated in the small-scale sector are not able to provide aer-sales service.
Rising income levels, growing health consciousness, rapid urbanisation and rise of medical tourism are expected to drive the
demand for medical and surgical instruments. Government’s commitment to improve healthcare facilities and liberalisation
of trade and investments laws would also expand the market for medical and surgical instruments.
Process Control Instruments: Process control instruments and systems are instruments and systems used for measurement
and control of process variables. Process variables are physical or chemical parameters, the variations of which can aect the
operation of a manufacturing process. These variables include humidity, pressure, temperature, liquid level, ow, vacuum,
vibration, specic gravity, and chemical composition including pH, among others. Use of process control instruments and
systems is highly signicant in large and sophisticated process industries such as fertilisers, power plant, steel, cement
plants, petroleum reneries and petrochemical industries, among others.
The industry is a liberalised one and 100% FDI is permied in this sector. Transfer of technology has been the major
cornerstone for the development of the domestic process control instruments and system industry. There exists a gap between
technology adopted in India and contemporary international technology. Technology presently used in the Indian industry
is microprocessor-based centralised control system. The Indian industry is capable of handling open control systems and
smart control devices; however, latest developments such as total integrated management and control approach, which are
currently being adopted in the developed countries, are yet to be adopted in the country.
Antifriction roller bearing: Roller bearings are components used to reduce or eliminate friction between moving parts
and thus reduce wear & tear of machines. They help improve machine performance and are thus a critical component
of any equipment that rotates. It nds varied application, ranging from simple electric fans to complex space rockets.
Depending on its usage, a bearing may have to withstand prolonged use, high-speed rotation, varied temperatures, or a
corrosive environment. Bearings are available in two distinctive shapes, ball, and roller. There are four dierent types ofroller bearings – cylindrical roller bearings, needle roller bearings, tapered roller bearings and spherical roller bearings.
The Indian bearing industry has recorded healthy growth in the past few years. The Indian manufacturers are able to
meet more than three-fourth of the demand for general purpose bearings. The Indian bearing industry’s product range
comprises of more than 500 types of bearings. Indian manufacturers do not produce special purpose bearings as demand
for the same is low and investments required are huge as bearings is a capital intensive industry. Special purpose bearings
are therefore imported.
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The bearings industry is highly fragmented. The organised sector caters to both the original equipment manufacturers and
replacement market. The unorganised sector, which manufactures low quality small bearings, caters to the replacement
market. The manufacturing activity of a few small-scale units is restricted to assembly of imported components. The
automobile industry is the major user industry for the bearings industry. Given the growing demand for automobiles in the
country, demand for bearings would increase in the coming years.
Industrial Fasteners: Industrial fasteners cover a wide range of products such as nuts, screws, bolts, studs, rivets, nails,
washers, etc. Fasteners can be broadly classied into two groups, high tensile strength fasteners, and mild steel fasteners
depending on their tensile strength. Manufacture of high tensile fasteners requires superior technology and these are hence
mainly manufactured in the organised sector. On the other hand, manufacturing of mild steel fasteners is concentrated
in the unorganised sector. In fact, manufacture of all types of fasteners except high tensile fasteners and special purpose
fasteners are reserved for the SSI sector. Fasteners are used in the assembly of engineering systems.
The automobile industry is the largest consumer of fasteners. The other major user-segments are textile machinery,
railway locomotives, construction, computer hardware and general engineering. There exists huge export potential for
Indian industrial fasteners. However, poor product standardisation, relatively higher raw material costs and low labour
productivity make Indian fasteners less competitive in the global market.
Ferrous Castings: Ferrous castings constitute essential intermediates for automobiles, industrial machines, power plants,
chemicals & fertiliser plants and cement plants, among others. They are therefore vital for the growth and development
of the engineering industry. The domestic industry is well established, giving rise to a huge export potential for Indian
manufacturers. To capitalise on this export demand, leading manufacturers have undertaken modernisation and
upgradation of their manufacturing facilities to improve productivity and product quality and also reduce their production
costs. Given the wide spread usage of castings across industries and the huge export potential, there exists considerable
scope for establishing additional capacity in this area.
Steel Forgings: The forging industry has emerged as one of the major contributors to the manufacturing sector of the
Indian economy. Depending on the scale of operations, the industry can be categorised as large, medium, small and tiny.
SMEs comprise a major portion of this industry.
Increasing globalisation has led to sharp rise in investments in the sector. This has led to the industry becoming capital
intensive from being labour intensive. To expand their markets and have a global reach, the small-scale units are also
increasing their capital investments. The small-scale units have upgraded their facilities in terms of technology and qualityand a number of them are now suppliers to the OEMs in the automobile sector. The automotive industry is the major end-
user of the forging industry. The other user industries include industrial machines, railways, oil & gas, power plants and
chemical plants, among others.
The Indian forgings industry has made rapid strides and currently not only meets almost the entire domestic demand, but
has also emerged as a large exporter of forgings. The major export markets are USA, Europe and China. The outlook for the
industry looks promising, backed by the robust demand from the automotive sector, both domestic and global.
Seamless Steel Pipes & Tubes: Seamless steel pipes & tubes nd widespread usage in the hydrocarbon industries, processing
& general engineering industries. Boiler pipes, as the name suggests are used in boilers, heat exchangers, super heaters,
among others, while casing & tubing are used for drilling of oil and gas. Seamless pipes nd application in industries where
strength, resistance to corrosion and long shelf life are critical. The industry is liberalised and 100% FDI is permied in thesector under the automatic route.
The oil sector is the major end-user segment of seamless pipes & tubes. The other user segments include boilers, ball
bearings, automobiles, chemical plants, fertilisers, petrochemical plants, industrial machinery, among others. With the
gradual rise in power and oil sector, the demand for seamless steel pipes & tubes segment is expected to increase going
forward.
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and elds. In addition to various engineering industries, they are used for water, oil and gas distribution, line pipes, fencing,
scaolding, etc. They are also used for agricultural purposes, drinking water supply, thermal power, for hand pumps for
deep boring wells and also as protection for cables (telecom), among others. Depending on the requirement of the end user
industry, ERW steel pipes & tubes are available in various wall thicknesses, diameters, and qualities. The dierent types
include line precision pipes, tubular poles, electric poles, lightweight galvanised pipes for sprinkler irrigation, among
others. The industry has sucient capacity to manufacture the dierent types of pipes & tubes. High performance ERW
steel pipes & tubes possess high strength, toughness and are corrosion resistant.
In the manufacturing process of ERW steel pipes & tubes, the edges to be welded are mechanically pressed together
and electric resistance or electric induction is used to generate the heat required for welding. With the adoption of beer
welding technology, ERW pipes & tubes are now widely used in the oil & gas sector. A number of ERW steel pipes & tubes
production units are in the SSI sector. Higher demand from the oil & gas industry, infrastructure and automobile industries
has led to a healthy increase in production of ERW steel pipes.
Submerged-Arc Welded (SAW) Pipes: SAW pipes are mainly used for oil & gas transportation and water distribution. SAW
pipes are of two major types, longitudinal and helical welded SAW pipes. The laer are used for low-pressure application,
while longitudinal SAW pipes are preferred for high-pressure application such as gas pipes. Longitudinal SAW pipes are
more than 25 mm in thickness. In terms of production costs, it costs less to manufacture helical SAW pipes as compared
to longitudinal SAW pipes. In the manufacturing process of submerged-arc welded pipes, the heat necessary to melt the
edges of metal to be joined together is generated with the help of a concealed arc with no pressure between the two sides of
the weld. India has a high installed SAW pipes capacity with four major players including Jindal Saw Limited, Well Spun
Gujarat Limited, PSL Limited and Man Industries.
Bicycle Industry: The Indian bicycle industry can be categorised into two segments, those manufacturing bicycle parts,
and those manufacturing complete bicycles. Majority of bicycle parts and components are manufactured in the small-scale
sector, since most of the components other than free wheels and single piece hubs are reserved for the small-scale sector.
Large units are permied to manufacture bicycle frames, chains, rims, and that too only for captive consumption. Complete
bicycles are manufactured in the organised sector. The Indian bicycle industry conforms to well-accepted quality standards
in the international market, and more importantly, the industry is taking eorts to increase exports.
Outlook
The engineering sector is expected to grow in coming years due to investments in power, metal, oil & gas and petrochemicalindustries, infrastructure development and favaourable government policies. Growth in the manufacturing and industrial
sector would also boost growth in the engineering sector.
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The food and agro industry is one of the largest sectors in India in terms of production, consumption and export and growth
prospects. India has one of the largest arable lands in the world. It has diverse agro-climatic zones: hot and humid along
the long coastal regions, dry and cold in the mountainous regions and hot and dry in plateau regions. This diversity makes
India a unique destination for producing dierent kinds of horticultural and agro-products. Agriculture and allied sectors
are estimated to have grown by 2.5% in FY12. In FY12, contribution of agriculture including allied activities to India’s GDP
at 2004-05 prices is around 13.9% with agriculture alone accounting for 12.3% followed by forestry and logging at 1.4% and
shing at 0.7%. Although the share of agriculture in GDP has shown a declining trend, but the importance of the sector tothe economy cannot be undermined with the fact that it provides a vocation to about 70% of the population.
The food processing industry is of great signicance for the country’s development as it is connected to the economy,
industry and agriculture. It is one of the most diverse sectors of manufacturing, covering marine products, dairy products,
fruits and vegetables, sugar, edible oils and beverages. During Apr-Nov 2011, it has grown at 17.2% as against 4.3% growth
of the overall manufacturing sector. Currently, under manufacturing, food processing is one of the fastest growing segments
accounting for about 27% of the average industrial growth.
Table 2.10: Rate of growth of output of some processed food products (in %)
FY08 FY09 FY10 FY11 FY12*
Sugar 15.2 (33.9) (6.0) 30.2 38.3
Fruit pulp 87.0 (2.0) 5.0 35.1 30.4
Fruit juices 20.9 41.0 46.6 16.8 26.0
Cashew kernels 8.4 (4.2) (0.9) (7.9) 22.2
Instant food mixes 30.8 19.4 20.8 10.6 17.9
Mineral water 29.4 6.9 28.3 19.9 15.4
Chocolate 8.9 24.2 11.3 13.7 13.3
Malted foods 8.5 (36.8) (8.8) 8.4 6.4
Buer 4.8 3.4 (22.7) (4.7) 0.1
Biscuits (0.9) 29.2 10.4 (1.4) (1.6)
Frozen meat (12.9) 76.8 27.4 (21.8) (1.7)
Source: Economic survey 2011-12 Note: * Apr-Dec
Food processing involves any type of value addition to agricultural or horticultural produce and includes processes such
as grading, sorting and packaging which enhance the shelf life of food products. The food processing industry provides
vital linkages and synergies between industry and agriculture. The government has announced various scal reliefs and
incentives, to encourage commercialisation and value addition to agricultural produce, for minimising pre/post-harvest
wastage, generating employment and contributing to export growth. India’s food processing sector covers a wide range of
products such as fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, sheries, plantation,
grain processing and other consumer product groups including confectionery, chocolates and cocoa products, soya-based
products, mineral water, high protein foods etc.
The food processing industry directly employs about 13 mn people and nearly 35 mn people indirectly. The food processingsector contributes over 14% of manufacturing GDP of which unorganised sector accounts for more than 70% of production
in terms of volume and 50% in value terms. India annually yields 110 mn tonnes of milk, 150 mn tonnes of fruits and
vegetables, 485 mn livestock, 230 mn tonnes of foodgrains, 7 mn tonnes of sh, 489 mn poultry and 45,200 mn eggs.
However, in processing, India trails the developed and some developing countries by a wide margin. Only 2.2% for
fruits and vegetables are processed in India as against 65% for the US, 78% for the Philippines and 23% for China. India’s
processing of 26% of marine products, 6% of poultry and 20% of bualo meat is also lower as against 60–70% average for
the developed countries.
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Chart 2.14: Trend in exports of food and agro products: FY08 to FY12
Source: APEDA
Overall exports of food and agro products grew at four-year CAGR of 28% duringFY08–FY12 to ` 860 bn in FY12. This
growth was driven largely by superior growth of export of animal products such as bualo meat, poultry products, animalcasting and other processed foods growing, which grew at more than 30% each.
The contribution of animal products to exports registered an upward trend from 16% in FY08 to 17.6% in FY12 whereas
the contribution of cereals declined from 47% in FY08 to 36% in FY12 mainly due to export ban on non-basmati rice, export
duty on basmati rice, and restrictions on private participation in wheat purchases.
Table 2.11: Segment-wise major export destinations
Cereals Vietnam, Malaysia, Bangladesh, Yemen, US, UK, Taiwan, Indonesia Sudan, Singapore, UAE, Iran,
Kuwait, Saudi Arabia
Source: APEDA
Schemes for Technology up-gradation, establishment and expansion of FPIsGovernment of India (GoI) has implemented schemes for upgrading technology and expanding and modernising the food
processing industries to aract potential entrepreneurs. The table below indicates the nancial assistance released by the
Ministry for food and agro products.
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Oil (As on 24/1/11) 205.15 56.26 36.13Pulses 68.87 16.23 43.15
Flour 99.83 39.36 90.75
Alcoholic Beverages NA NA 27.3
Consumer Industries 183.7 224.72 196.74
Source: Ministry of Food Processing Industry
Foreign direct investment policyThe country’s food processing market is opening up to a wide range of investors across the globe. Government is also actively
encouraging investment in agro processing industries to reduce wastage and boost value addition. As per extant policy,
FDI up to 100% is permied under the automatic route in the food infrastructure (Food Park, Cold Chain/Warehousing).
Foreign participation of up to 100% for most processed items except alcoholic beverages and items reserved for small scale
units has also been approved by GoI.
During FY01 – FY12, the cumulative FDI inows in the food processing sector which includes food processing industries,
fermentation industries, vegetable oils & vanaspati and tea & coee industries stood at ` 127.5 bn. The cumulative FDI
inows during this period in the sector accounted for 1.65% of the total FDI inows in the country. In the sector, maximum
cumulative FDI inows has been done in food processing industries at ` 64.9 bn followed by fermentation industries at `
45.1 bn during FY01 – FY12.
Credit deployment by the scheduled commercial banks to the food processing sector has also shown a growing trend over
the period of past few years. As per RBI, the total bank credit outstanding to food processing sector stood at ` 922.53 bn
as on Dec 31, 2011, 17% higher than the amount as on the same period previous year. Outstanding bank credit includes
any principal amount which has become due from the units which must have not reapid the amounts. The share of food
processing sector in the total credit outstanding to all Industries stood at 4.96%, almost the same as during the previous
year.
Chart 2.15: Credit deployment to food processing industries
Source: Ministry of Food Processing Industry, D&B Research
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Eleventh and twelh ve year planThe total plan outlay of the Ministry rose from ` 6.5 bn during the 10th Plan to ` 40.3 bn during the 11th Five Year Plan. In
the 11th plan, maximum increase in the outlay was seen under Scheme for Infrastructure Development, wherein the plan
outlay has increased from ` . 1.8 bn in 10th plan to ` . 26.13 bn. The scheme-wise outlays for 11th Plan are given below:
Table 2.13: Total Outlays for the 11th Plan period (2007-2012) (Rsbn)
Scheme for Infrastructure Development 26.13
Scheme for Technology Up-gradation/Establishment/ Modernisation of Food Processing Industries 6.00
Scheme for Quality Assurance, Codex standards, R&D and promotional activities 2.50
Scheme for Human Resource Development 0.65
Scheme for strengthening of institutions 3.25
Scheme for Up-gradation of Quality of Street Foods 1.78
Source: Ministry of Food Processing Industry, D & B Research
The 11th Five Year Plan approach was mainly driven by ‘Vision 2015’ which focused on increasing level of processing of
perishables, value addition and share in global food trade. The plan included various new components such as promoting
the spirit of public private partnership and integrated approach with appropriate emphasis on backward linkages. The
major thrust areas of the 11th ve year plan were development of value chain and processing infrastructure, upgrading or
modernisation of technologies, promoting quality certication and standards, strengthening of institutional mechanism for
skill development etc. Some of the policy measures and initiatives taken by GoI during the plan period include:Most processed food items have been exempted from the purview of licensing under the Industries (Development &•
Regulation) Act, 1951.
The industry is includedon the priority sector list facilitating easy availability of nance.•
Excise duty levied on ready-to-eat products, instant food mixes, aerated drinks and fruits and vegetables processing•
units have been reduced.
GoI has approved foreign participation of up to 100% for most processed items except alcoholic beverages and items•
reserved for small scale units.
A large number of foreign collaborations have been approved.•
Excise Duty of 16% on dairy machinery has been completely waived o and excise duty on meat, poultry and sh•
products has been reduced from 16% to 8%.
Tax concessions (100% IT deduction for 5 years and 25% in next 5 years for new agro processing, waiver of excise duty•
on dairy machinery, zero input duty on EOUs etc) External commercial borrowings to be available for cold storageLaunching of National Mission on Food Processing•
Capital investment in creation of modern storage capacity eligible for viability gap funding•
Ministry of Food Processing industries also formulated appropriate policies and implemented many schemes targeted to
infrastructure development, technology upgradation, quality assurance, reduce wastage and increase value addition in the
value chain.
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Major schemes implemented by the Ministry of Food Processing Industry
Infrastructure development
Mega Food Parks (MFPs)
10 MFPs were approved in the rst phase•
Five MFPs were approved in the second phase•
Proposals have been invited for additional 15 MFPs•
Each of these MFPs is likely to consist of 30–40 food-producing units in the cluster•
Cold chain, value addition and preservation infrastructure
Eight of the 10 projects approved in the rst phase in 2008–09 have started commercial production.•39 projects approved in the second phase in 2011-12.•
Likely to reduce wastage especially among perishable food products.•
Modernisation and seing up of abaoirs
10 projects assisted so far with a grant assistance of• ` 357.4 mn as on Jan 31. 2012
Focusses on hygienic and more humane slaughtering of animals.•
Technology up-gradation, establishment/modernisation of FPIs
852 units have been assisted with a grant of• ` 1,358.7 mn during FY12 (Apr-Jan)
Quality assurance, codexs standards, R&D, and promotional activities in FY12
Five projects for seing up/upgradation of food testing labs approved•
Two proposal for implementation of HACCP/ISO certication of units approved•
Eight proposals for R&D approved•
Human resource development during FY12
One proposal for creation of infrastructure facilities•
25 proposals for seing up of Food Processing Trading Centres (FPTCs)•
122 entrepreneurship development programmes have been held•
Strengthening of institutions as centres of excellence. Following have been strengthened:
Indian Institute of Crop Processing Technology, Thanjavur•
National Institute of Food Technology and Entrepreneurship Management, Kundi, Haryana•
Indian Grape Processing Board•
National Meat and Poultry Processing Board•Source: Economic Survey 2011-12
For the 12th Five Year Plan (2012-2017) greater emphasis would be laid on decentralised process of implementation with
greater involvement of states in selection of projects and monitoring their implementation. In this ve year plan, major
thrust would be on addressing critical issues impacting the value chain in the sector by focusing on policy making and
coordination instead of project implementation, so as to. Also, the existing focus on infrastructure development will
be continued with the expansion of scope and depth so as to ensure sustainability of the value chains. Some of the key
recommendations of the working group for the 12th plan activities include:
Seing up of National Mission on Food Processing to improve coordination and implementation of schemes and to•
enable greater involvement of state governments.
Expanding and modifying existing infrastructure development schemes•
New Mega Food Parks□Additional cold chain projects□
Establishment of new abaoirs and modernization of existing abaoirs•
Develop and strengthening of existing and new institutions•
Taking up a nationwide skill development program along the lines of special projects for skill development of rural•
youths under SGSY of MoRD.
Puing in place a network of food testing labs (Government/ Private) by providing incentives.•
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The Indian textiles industry plays an important role in the country’s economic growth. It contributes around 14% to the
industrial production, 4% to the GDP, and 17% to the country’s export earnings. It also accounts for nearly 12% share of
the total exports basket, provides direct employment to over 35 mn people, and is also the second largest provider of
employment aer agriculture. India is the second largest producer of silk in the world and a major producer of both raw
jute and jute products. Further, 95% of the world’s hand-woven fabric comes from India.
The Indian textile industry is fragmented, with only a few large players and numerous small and medium-size companies.The textiles industry is classied as the hand-spun and hand-woven sector and the capital intensive, organized mill sector,
which consists of spinning and composite mills. The decentralized power looms/hosiery and the kniing sector form the
largest section of the textiles sector.
The major sub-sectors within the textiles sector include the organized coon/man-made bre textiles mill industry, man-
made bre/lament yarn industry, wool and woollen textiles industry, sericulture and silk textiles industry, handlooms,
handicras, jute and jute textiles industry, and textiles exports.
Trends in the Domestic MarketAs per the Ministry of Textiles, between FY07-FY12, India’s cloth production (including Khadi, wool, and silk) grew at
a 2.8% CAGR, mainly driven by the small scale, independent powerloom sector. During the same period, India’s cloth
production recorded y-o-y growth in each of the years, except FY09 and FY12. During FY09, cloth production declined by 2% to 54,966 mn sq mtrs, mainly due to lower output by the handloom and decentralized power loom sector. In FY10,
cloth production increased 9.8% to 60,333 mn sq mtrs. However, the growth lost momentum during FY11 with production
growing 3.7 % to 62,559 mn sq mtrs. The total cloth production however, faced a decline in production by 2% during FY12
to 61,364 mn sq mtrs. During Apr-Aug 2012, cloth production stood at 26,554 mn sq mtrs.
Chart 2.15: India’s Cloth Production (Mn Sq Mtrs)
*April – August 2012 Source: Ministry of Textiles
The composition of cloth production has remained more or less unchanged during the past decade. Between FY07-FY12,the average share of coon in total cloth production was around 49% and average share for non-coon cloth was 38%.
During FY11, production of coon cloth grew 9.7% 31.7 bn sq mtrs and declined 3.5% in FY12 to 30.5 bn sq mtrs and stood
at 14.1 bn sq mtrs as on Aug 2012. Production of non-coon cloth declined 4.6% in FY11 and further declined 0.82% in FY12
to 61.3 bn sq mtrs and stood at 26.5 bn sq mtrs as on Aug 2012.
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India has the potential to increase its textile and apparel share in world trade. The Indian textiles industry produces a
wide variety of bres, from coon to man-made, wool, silk, jute, and multiple blends catering to dierent demands and
needs of companies. India has become a popular destination for many big global retailers due to its strength of vertical and
horizontal integration. The quality of the country’s products is seen in the repeat orders from these global companies and
the signicant growth in their outsourcing from India. Textiles form one of the largest components of India’s exports and
can grow further and faster. Given the growth in textile exports due to the investment owing in this sector to expand the
capacity in the entire value chain, the working group constituted by the Planning Commission has estimated the overallgrowth for exports at 15% with an export target of US $ 65 bn and creation of 25 mn additional jobs by end of Twelh Five
Year Plan (FY17).
Table 2.14: Projections of Exports for Twelh Five Year Plan (2012-17)
US $ Mn
FY13 FY14 FY15 FY16 FY17
Coon Textiles 8400 9408 10537 11801 13218
Man Made Textiles 6380 7401 8585 9959 11552
Silk Textiles 880 968 1065 1171 1288
Woollen Textiles 770 847 932 1025 1127
Clothing 16520 19494 23002 27143 32029
Total 32950 38117 44121 51099 59214
Jute, Coir & Handicras 4235 4659 5124 5637 6200
Grand Total 37185 42776 49245 56736 65414
Source: Planning Commission, Working Group for Twelh Five Year Plan (2012-17)
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Investment: FDI in textile IndustryIn the textile sector, 100% Foreign Direct Investment (FDI) is allowed under the automatic route. The industry aracted FDI
worth US $ 1.15 bn between Mar 2001 and Jun 2012, which accounts for 0.66 % of the total FDI inows in the country. FDI
in the textile industry stood at US $ 164 million in FY12 and stood at US $ 33 million as on Jun 2012.
Plan ExpenditureThe total plan expenditure as on Mar 2012 is ` 42.59 bn (provisional). This is 85.19% of the budgeted estimates of ` 50 bn
for FY12. The total plan expenditure as on Sep 2012 is ` 10.86 bn (provisional). This is 15.51 % of the budgeted estimates of
` 70 bn for FY13.
Union-Budget FY13A reduction of excise duty on readymade garments is expected to result in a decline in the cost burden on the manufacturers.
Further, a reduction in customs duty on titanium dioxide is expected to make imports of titanium dioxide cheaper. Two
more mega handloom clusters were announced in addition to four mega handloom clusters already operational. These
clusters will help the weavers in technology upgradation and product diversication. Besides that, a power loom mega
cluster is also proposed to be set up in Maharashtra. It is expected that the power loom cluster will have modern machinery,
testing services, and have a Computer-Aided Design (CAD) studio to address the need of the local artisans and weavers. In
addition to this, a pilot scheme has also been proposed for promotion of geotextiles.
Government Initiatives for Textile SMEs
Automated shule-less looms exempted from basic customs duty of 5%.•Full exemption from basic customs duty on automatic silk reeling and processing machinery and its parts.•
Currently, excise duty of 10% is applicable on branded readymade garments, with abatement of 55% from the retail•
sale price. Now, with the proposed increase in duty to 12%, the abatement has been enhanced to 70%. As a result, the
incidence of duty, as a percentage of the retail sale price would come down from 4.5% to 3.6%.
Reduction in basic customs duty from 15% to 5% on wool waste and wool tops.•
Reduction in customs duty from 10% to 7.5% on titanium dioxide.•
Financial package of• ` 38.84 bn for waiver of loans to handloom weavers and their co-operative societies.
New handloom cluster in Prakasam and Guntur districts of Andhra Pradesh.•
Weaver Service Center in Mizoram, Nagaland, and Jharkhand.•
Powerloom mega cluster in Maharashtra with a budget allocation of• ` 700 mn.
` • 5,000 mn pilot scheme in the 12th Five Year Plan for promotion and application of geo-textiles in the North-Eastern
region.Source: Union Budget FY13, D&B Analysis.
Future OutlookThe Working Group of the Twelh Plan (2012-17) projects an average industrial growth of 11-12% along with signicant
growth in export and employment. With growth in textiles production, employment in this sector is also expected to grow
15%. The employment in textiles is expected to increase to 52 mn persons by the terminal year of the Twelh Plan.
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