Engineering goods top export list on low wage and talent


In May 2010 Nissan Motor inaugurated its plant in Chennai that was to supply India-made Micra to Europe, Middle East and Africa. 

Exactly a year later, on May 28 this year, Tata's breakthrough engineering Nano crossed the Indian borders for the first time, debuting in Sri Lanka in the fiftieth year of the car maker's presence in the island nation. 

These are not isolated instances, but just two of the high-profile examples of how Indian engineering is making a mark in the World with numbers to back the claims. 

India's shipments of engineering goods have increased almost eight fold in the last decade to become the biggest item of exports, ahead of primary products that used to dominate earlier. 

Engineering goods include metal products, industrial machinery and equipment, auto and its components, and transport equipment. 

Experts attribute the rise to the significant competitive edge the Indian companies have acquired in the engineering space and their ability to rise up the value chain. 

Citi economists Rohini Malkani attributes the rise to "low labour costs combined with requisite skill sets which India enjoys, thanks to the continued increase in engineering graduates." 

This has allowed India to target a range of markets, from emerging ones in Africa to sophisticated and quality conscious countries in Europe. 

"The rest of the world has begun to see India as a good destination for engineering goods where we have scale of operations as well as niche and proprietary products," said Yatin Shah, managing director, Precision Camshafts. 

The government's incentives to exports to non-traditional markets have helped Indian companies. The share of Europe and the US is down nearly 15 percentage points over the decade. The share of Russian Federation , Middle East and Africa is up to 13.5% from 5% a decade back. 

"The engineering goods have moved from the low to the medium end in terms of skill, knowledge and R&D applied," says KT Chacko, Director of IIFT. 

A lot of credit must go to the automobile industry. Multinationals came here hoping to grab a share of the rising car market but found they could use some of the local edge for their global operations. 

Mercedes Benz does not export cars but sends out engineering drawing and components sourced from Indian vendors for Daimler globally. 

Local auto components manufactures have managed to ride this opportunity to reach out to global market just when the developed world was finding manufacturing increasingly unviable. 

"Emerging markets in general are more cost competitive," said Shankar Raman , CFO of engineering major L&T. "There seems to be a shift from the high cost-low productivity west to low cost-high productivity east," he said. 

Precision Camshafts is increasing its capacity and will soon become the largest camshaft manufacturer in the world. 

A two-and-a-half times increase in exports over a period of 7-8 years is clearly achievable", BN Kalyani, Chairman and Managing Director, Bharat Forge said. 

In fiscal 2011, auto components exports were about $ 12 billion. 

Indian exporters have also tried to avoid a head on competition with China. 


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