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Macro economic fundamentals continue to remain strong. But the government’s monetary measures to curb liquidity, a rise in input costs like oil, coupled with the recent slowdown in the industrial sectors may impact growth momentum of the capital goods sector in the short term.
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However, the current pace of hydrocarbon and infrastructure development in India and its neighboring countries (for the Indian companies that cater to these areas) hold promise for engineering companies.
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World-class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. This makes the future of the Indian engineering sector extremely bright.
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The government's initiative to bring clarity to the power sector reforms is a welcome sign for the industry. More coordination between the Centre and states for infrastructure development is a step in the right direction.
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The shift in focus towards reducing T&D losses will further increase the order book size of the companies operating in this realm. With power generation and distribution looking up, power equipment companies can look forward to a promising future.
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Deregulation in the Indian context, combined with high global prices for crude has led to a surge in exploration and production activities both domestically and globally. Also, there has been a radical change in the government’s approach to E&P (exploration and production) activities in the country. This thrust in development of new wells and improvement of output from old wells promises bright prospects for engineering companies
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Automation business has perked as the user industries started realising its benefits. With increasing competition among the power companies, the consumers will demand better quality and uninterrupted power supply. In such a scenario automation will play an important role. With the automation technologies gaining momentum, companies like ABB and Siemens will benefit a lot going forward.
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Capacity addition and de-bottlenecking exercise being carried by various industries like steel, power, refineries, chemicals etc is likely to provide a fillip to the industrial segment of the engineering companies.
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If India’s nuclear deal with the US goes off as planned, it will mean big business for companies planning to enter nuclear power generation and consequently power equipment manufacturing.
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FY08 proved to be yet another good year for the Indian engineering and capital goods industry. Strong growth in industrial and manufacturing industries reflected in the picking up of investment activities in areas like power, infrastructure and processes. The capital goods index recorded strong growth during the entire year, though with some blips during the months April 2007 and January 2008.