- Language: English
- 724 Pages
- Published: February 2013
- Region: Global
Indian Capital Goods
- Published: October 2007
- Region: India
- 90 Pages
- Cygnus Research
The Indian Industry grew by 11% and manufacturing by 12% in 2006-07, supporting each other's strong growth. The capital goods industry grew by a healthy 17.7% in 2006-07 compared to 2005-06. Electrical equipments (including computer software and electronics) attracted highest FDI into India during 2006-07 in the capital goods industry.
Key Findings & Highlights
- Textiles industry is growing at a rapid rate annually contributing 4% to the GDP.
- The capital goods industry attracted highest FDI into India during 2006-07.It was the electrical equipments (including computer software and electronics).
- The export obligation under EPCG - which was till now based on the past exports of the products for which EPCG authorisation was being claimed, would now be based on the average exports of the firm/company.
Why you should buy this report
- Gain a thorough understanding the business opportunities in next five years and major prospects from major regions.
- Understand the major issues involved in export supplies and also understand the schemes and exemption involved.
- Reveals the statistics of the capital goods industry and the share of FDI in the equipment Industry. Also the major prospects for the processing plant equipment.
1. INDUSTRY OVERVIEW
1.1 Textile Machinery
1.2 Construction machinery
1.3 Heavy Engineering (electrical & non-electrical)
1.4 Earthmoving and Material-handling Equipment
1.5 Processing Machinery
1.6 Agro Implements (power driven)
2. MARKET OVERVIEW
2.1 Textile Machinery
2.1.1 Present Status
2.1.2 Growth Opportunity
2.2 Construction Machinery
2.2.1 Present Status
2.2.2 Growth Opportunity
2.3 Heavy Engineering electrical and non-electrical)
2.3.1 Present Status
2.3.2 Growth Opportunity
2.4 Earthmoving and Material-handling Equipment
2.4.1 Present Status
2.4.2 Growth Opportunity
2.5 Processing Machinery
2.5.1 Present Status
2.5.2 Growth Opportunity
2.6 Agro Implements
2.6.1 Present Status
2.6.2 Growth Opportunity
3. GROWTH DRIVERS
3.1 Growth in Indian Economy
3.2 Growth in Core Sectors
3.3 Reforms Undertaken by Government
3.4 Capital Inflows
3.5 Recent Developments
3.6 Growth in Capital Goods Exports
4. REGULATIONS & POLICIES
5. ISSUES & CHALLENGES
5.1 Increasing Import of Second Hand Machinery
5.2 Competition from MNCs
5.3 Capacity & Modernisation
5.4 Duty Structure
5.5 Lack of Export Thrust
5.6 Economic Status of Farming Community
6. CRITICAL SUCCESS FACTOR
6.1 Focus on constant technology and product upgradation, innovation
6.2 After sales service
6.3 Reduce dependence on projects and increase product sales
6.4 Capacity management
6.5 Concentrate on increasing presence in international markets
7. Major Players
7.1 Textile Capital Goods Company
7.1.1 Lakshmi Machine Works Ltd
7.2 Construction Capital Goods Company
7.2.1 Atlas Copco India Limited
7.2.2 Action Construction Equipment Limited
7.3 Engineering (electrical and non-electrical) Capital Goods Company
7.3.1 Bharat Heavy Electricals Limited
7.3.2 ABB Limited
7.3.3 Crompton Greave Limited
7.4 Earthmoving and Material Handling Capital Goods Company
7.4.1 Larsen & Toubro Limited
7.4.2 Bharat Earth Movers Limited
7.5 Processing Machinery Capital Goods Company
7.5.1 Praj industries Limited
7.5.2 Alfa Laval India Limited
7.6 Agro Implements Capital Goods Company
7.6.1 HMT Limited
7.6.1 Mahindra & Mahindra Limited
8. FUTURE OUTLOOK ANNEXURE
1: Bibliography Annexure
2: List of Abbrevaitions Annexure
3: Section 10B of Income Tax Act List of Figures
Figure 3.1: Growth in Capital Goods Sector (2002-03 to 2006-07)
Figure 3.2: Sector Wise Growth in India (2005-06 to 2006-07)
Figure 7.1: Lakshmi Machine Works PBDIT VS PBDIT margin FY05-FY07
Figure 7.2: Lakshmi Machine Works Total Income VS PAT FY05-FY07 Figure
7.3: Atlas Copco's PBDIT VS PBDIT margin 2004-2006 Figure
7.4: Atlas Copco's Total Income VS PAT FY 2004-2006 Figure
7.5: ACE's PBDIT VS PBDIT margin FY05-FY07 Figure
7.6: ACE's Total Income VS PAT FY05-FY07 Figure
7.7: BHEL's PBDIT VS PBDIT margin FY05-FY07 Figure
7.8: BHEL's Total Income VS PAT FY05-FY07 Figure
7.9: ABB's PBDIT VS PBDIT margin 2004-2006 Figure
7.10: ABB's Total Income VS PAT FY 2004-2006 Figure
7.11: Crompton Greave's PBDIT VS PBDIT margin FY05-FY07 Figure
7.12: Crompton Greave's Total Income VS PAT FY 05-FY07 Figure
7.13: L&T's PBDIT VS PBDIT margin FY05-FY07 Figure
7.14: L&T's Total Income VS PAT FY05-FY07 Figure
7.15: BEML's PBDIT VS PBDIT margin FY05-FY07 Figure
7.16: BEML's Total Income VS PAT FY05-FY07 Figure
7.17: Praj Industries Ltd's PBDIT VS PBDIT margin FY05-FY06 Figure
7.18: Praj Industries Ltd's Total Income VS PAT FY05-FY07 Figure
7.19: Alfa Laval Indian Ltd's PBDIT VS PBDIT margin 2004-2006 Figure
7.20: Alfa Laval Indian Ltd's Total Income VS PAT 2004-2006 Figure
7.21: HMT Ltd's PBDIT VS PBDIT margin FY05-FY07 Figure
7.22: HMT Ltd's Total Income VS PAT FY05-FY07 Figure
7.23: Mahindra & Mahindra's PBDIT VS PBDIT margin FY05-FY07 Figure
7.24: Mahindra & Mahindra's Total Income VS PAT FY05-FY07
LIST OF TABLES
Table 1.1: Index of Industrial Production for Capital Goods (2006-07)
Table 1.2: Growth in Capital Goods Sector (2002-03 to 2006-07)
Table 1.3: Textile machinery Production, Exports and Imports (2001-02 to 2005-06)
Table 1.4: Construction Equipment Cost in Various Infrastructure Segment
Table 1.5: Heavy Engineering (Electrical) sales and Exports by Domestic Companies (2001-02 to 2005-06)
Table 1.6: Machine Tools (NC/non-NC machine) Production, Import and Export (2002-03 to 2006-07)
Table 1.7: Heavy Engineering (non-Electrical) Imports and Exports by Domestic Companies (2001-02 to 2005-06) Table 1.8: Material Handling Equipment Exports and Imports (2001-02 to 2005-06)
Table 1.9: Food Processing Machinery Import and Export (2001-2005)
Table 1.10: Number of Tractors Produced and Exported (2001-02 to 2005-06)
Table 3.1: Trend in Capital Inflow in various capital goods related industry
Table 3.2: Capital Goods Foreign Trade Performance (2005-06 and 2006-07)
Table 3.3: Some Important Goods Foreign Trade Performance (2005-06 and 2006-07)
The Indian Industry grew by 11% and manufacturing by 12% in 2006-07, supporting each other’s strong growth. Reflecting the buoyant capacity addition in the economy, the capital goods industry grew by a healthy 17.7% in 2006-07 compared to 2005-06. The capital goods industries, registering growth rates of 5% or more, are mining and quarrying (5.1%), manufacturing (12.3%) and construction (10.7%).
Electrical equipments (including computer software and electronics) attracted highest FDI into India during 2006-07 in the capital goods industry. The FDI in the electrical equipment industry was 22% in 2006-07 compared to 26.1% in 2005-06. The Ministries of Commerce and Industry and Heavy Industries are in talks to allow 49% FDI for textiles machinery, leather equipment, automated machines in the construction sector, mining and computer numerically-controlled (CNC) machines. As of now, FDI in capital goods is restricted to equipment deployed by the power and petroleum sectors.
India imported INR275.75 billion worth of capital goods in 2005-06 alone, as per estimates by the Ministry of Heavy Industries. Of this, the highest spending was on heavy electrical machinery at INR105 billion, followed by textile machinery at INR71 billion. In case of process plant equipment, the country imported thrice as much as it produced domestically. The total import of plant equipment amounted to INR61 billion against indigenous production of INR21.25 billion. As far as domestic production of machinery and equipment is concerned, the market is dominated by one or two players in each sector as in the case of textiles. In fact, 40% of the country’s demand for capital goods was met through imports in the year.
The Indian textiles industry is growing at 17% rate annually and contributes about 4% to the GDP; in terms of the industrial production it contributes 14% and in India’s exports earnings 17%. It provides direct employment to over 35m people and is the second largest provider of employment after agriculture. In the textile machinery industry, Lakshmi Machine works leads the market. Lakshmi Machine Works currently has a market share of 55% in the domestic textile machinery industry. It competes with international players like Reiter of Switzerland, Trutzschler of Germany, Marzoli of Italy and its national competitors Kirloskar Toyoda and Trumac India.
The growth of construction machinery has been always correlated with the growth of the Indian economy and with the growth of infrastructure as the construction equipment is primarily used in these sectors. The construction industry contributes nearly 5.2% to the GDP and is the third largest source of employment after agriculture and textile industry. The size of construction equipment in India is over USD25 billion.
The investments in R&D by the engineering industry are amongst the largest in the corporate sector in India. The heavy engineering industry has established its presence in the global arena as well. The business includes thermal, hydro and gas-based power plants, substation projects, rehabilitation projects, besides a wide variety of products like transformers, photo voltaic equipments, insulators, switchgears and motors. The government-owned Hindustan Machine Tools Limited (HMT) alone accounts for nearly 32% of machine tools manufactured in India. Approximately 75% of the Indian machine tool producers have received the coveted ISO certification. While the large organised players cater to India's heavy and medium industries, the small-scale sector meets the demand of ancillary and other units.
Processed food market is the most important segment of the food industry and uses the processing equipment that accounts for over 32% of the total food market. India has an abundant supply of food, but out of the total produced only 2% of fruit and vegetables and 15% of milk produced are processed. In the last one year alone, FDI approvals in food processing have doubled. The cumulative FDI inflow in food processing has reached USD1.28 billion in March 2007, which is 2.68% of total FDI inflows into the country. Excise duty of 16% on dairy machinery has been reduced to zero for promotion of dairy processing industries. The customs duty on packaging machines will be reduced from 15% to 5%.
The Export Promotion Capital Goods (EPCG) scheme has been modified so that it is more user friendly, transparent and easy to administer. The tiny and cottage industry, which has been adversely hit by rupee appreciation, has been given 12 years time to complete the export obligation instead of normal period of eight years. However, the spares, tools and refractory would now be allowed under EPCG scheme for the existing plant and machinery also which may not have been imported under the scheme. This will help the industry to modernise and upgrade the production facility.
In order to increase exports from 100% Export Oriented Units (EOUs), benefit of Focus Market Scheme, Focus Products Scheme and Vishesh Krishi and Gram Yojana Scheme have been extended to those EOUs which are not availing Direct Tax benefits. More than INR1,500m has been released for settlement of pending Central Sales Tax (CST) claims of EOUs. In case of any delay in the disbursement of CST, the Development Commissioner would be providing interest on such delayed disbursement with effect from March 1, 2006.
According to the 11th Plan made by Government of India, the TUF Scheme has been extended up to 2012. The import custom duty on human-made fibre has also been reduced from 10% to 7½%. This will promote human-made fabrics. Thrust has been given to setting up of apparel and textile parks, and the outlay of funds has been increased from INR1,500m to INR4,250m.
The Government has laid down many plans to encourage the private sector participation and to increase the infrastructure spending, which will also improve the spending on the capital goods industry. According to the estimates made by the Government, the investment requirement for infrastructure is around USD450 billion against the earlier estimate of USD320 billion during the 11th five year plan.
The processing plant equipment exports are increasing the business opportunities and will increase in the next five years also. The major prospects for the processing plant equipment are from the Middle East; the requirement is in the large Greenfield refineries and fertilisers plant. Other major markets for the capital goods, especially in the heavy engineering segment are China and South America. The high oil and gas capital expenditure by oil-rich countries, importantly the Middle East, offers good business prospects for EPC (Engineer-Procure-Construct) players.
To achieve “Mission 2012: Power for All”, Government of India is planning to add 100,000MW capacity to the power sector. This will ensure the continuous growth of electrical industry both up-stream and down-stream, at least for the next few years. Hence, this is a good business prospect for the capital goods manufacturing companies in the medium to long term. The ongoing controversial Indo-US Nuclear pact, which is cleared by the US Congress and yet to be cleared by the Indian Government, would open up major opportunities for setting up Nuclear Power Plants in India, which ensures the growth of capital goods industry.
- Textile Capital Goods Company
- Lakshmi Machine Works Ltd
- Construction Capital Goods Company
- Atlas Copco India Limited
- Action Construction Equipment Limited
- Engineering (electrical and non-electrical) Capital Goods Company
- Bharat Heavy Electricals Limited
- ABB Limited
- Crompton Greave Limited
- Earthmoving and Material Handling Capital Goods Company
- Larsen & Toubro Limited
- Bharat Earth Movers Limited
- Processing Machinery Capital Goods Company
- Praj industries Limited
- Alfa Laval India Limited
- Agro Implements Capital Goods Company
- HMT Limited
- Mahindra & Mahindra Limited