Electric machinery and equipment sector contributes about 8% to manufacturing sector of India and 1.5% to India’s overall GDP. Electrical equipment industry broadly comprises of two segments: Generation Equipment (boilers, turbines, generators) and transmission & distribution (T&D) and allied equipment like transformers, cables, transmission lines, switchgears, capacitors, energy meters, instrument transformers, etc. The T&D equipment sector, dominates the sector making up for 85% of the industry whereas generation equipment sector accounts for the rest 15%.
In 2017-18, the total production of electrical equipment Industry stood at US$ 27.3 billion. Major electrical equipment manufactured in India includes electric power equipment and parts, electric wires and cables, boilers and parts, and transmission line towers and parts. India’s electrical equipment industry had a record seven-year high growth of 12.8% in 2017-18, mainly because of government spending on rural and household electrification schemes and programmes. Within the sector, the power transformer and distribution transformer market reached US$ 1.03 billion and US$ 1.09 billion in 2017-18, respectively. The market size of High Voltage (HV) Switchgear (including panels) and Low Voltage (LV) Switchgear (including panels) stood at US$ 723.82 million and US$ 2.45 billion in 2017-18, respectively. During April- September 2018, the overall electrical equipment industry further registered a y-o-y growth of 19.1%.
During 2006-07 to 2017-18, India’s energy requirement registered a CAGR of 5.24%, with the energy requirement reaching 1,212.13 BU (Billion Unit) in 2017-18. Going forward, India’s share of global energy demand is expected to rise to 9% by 2035. Higher demand for energy would lead to increase in capacity additions for power generation that, in turn, would boost demand for power generation and transmission equipment. T&D expenditure is set to grow in power generation and privatization of distribution.
Exports of electrical machinery and equipment rose to US$ 8.6 billion in 2017-18 from US$ 5.3 billion in 2013-14, registering a CAGR of 12.9%. Exports of electrical machinery and equipment during April 2018-January 2019 stood at US$ 6.93 billion. During this period, exports of power transformers and distribution transformers stood at US$ 72.96 million and US$ 100.74 million, respectively. Exports of HV Switchgear (including panels) and LV Switchgear (including panels) between Apr-Sep 2018 reached US$ 170.36 million and US$ 518.38 million, respectively.
Major export markets for the sector are the USA, UAE, Germany, and the UK. India is a major exporter of switchgear and control gear, transformers & parts, industrial electronics, cables, transmission line towers, conductors, rotating machines (motors, AC generators, and generating sets) & parts.
The government has delicensed the sector and 100% FDI is allowed under the automatic route in the electrical machinery sector, subject to all applicable regulations and laws.
Indian manufacturers are becoming more competitive with respect to their product designs, manufacturing and testing facilities. There exist investment opportunities in several segments including generation machinery like boilers, turbines and generators, transmission machinery and distribution machinery.
Growth in the power industry is expected to drive growth in the electrical equipment industry. Indian Electrical Equipment Industry Mission Plan (2012-22), aims to increase electrical equipment output to US$ 100 billion by 2022, and neutralize the trade deficit in the sector. Several demand trends will create opportunities for achievement of these targets. By 2022, domestic demand for generation equipment and transmission & distribution sector is expected to be in the range of US$ 25-30 billion and US$ 70-75 billion, respectively. Market-oriented reforms, such as the target of ‘Power for All’ plans are expected to add 93 GW during 2017-2022, which will further generate huge demand for power transmission & distribution equipment. Incentives for capacity addition in power generation will increase the demand for electrical machinery.
To make India the country of choice for the production of electrical equipment and reach an output of US$ 100 billion, areas like technology and R&D, the lowering of customs duties on a range of equipment, the setting up of the Electrical Equipment Skill Development Council (EESDC), the establishment of electrical equipment industry clusters, the enhancement of product-testing infrastructure in the country, an increase of shares in the export market and financial support, should be focused in order to achieve the targeted output.
