The Hindu Business Line : EPO to follow BPO success story

India's engineering process outsourcing (EPO) services would be a key element of the country's engineering export strategy, just as the business process outsourcing (BPO) enabled domestic software company in recent years to make a mark abroad.

The development of the EPO sector would have a far-reaching impact on Indian engineering industry as a whole, the Union Minister of Commerce and Industry, Mr Kamal Nath, has said here while presiding over the consultative committee meeting attached to his Ministry.

Market Share

"The EPO market in India has the potential to exceed $40 billion by 2020, which will catapult India's market share in this category to 30 per cent from the current 12 per cent.

And to tap the EPO market share, all the important stakeholders, including the Government, service providers and trade bodies, will need to boost investment in infrastructure and improve marketing efforts," he said. Engineering exports from India have crossed $5 billion in the first quarter of the current fiscal, registering a growth of 20 per cent.

But it has the potential to grow at a rate of 30 per cent annually; the Minister said citing a recent strategy paper prepared for the Engineering Export Promotion Council by A.F. Ferguson.

Stating that the Government has been attaching high priority to engineering sector, he said that 19 products and 34 sub-product categories had been identified as thrust ones for export thrust countries and products.

Taxation Issues

The EEPC Chairman, Mr Rakesh Shah, said that Indian engineering exporters faced a disability factor of 16 to 18 per cent compared to 6 to 8 per cent sustained by their competitors in South East Asia. He urged the Minister to address taxation issues such as service tax, State levies, which amounted to `exporting taxes' and eroded the competitiveness of Indian engineering products.

In a power-point presentation, the Joint Secretary, Department of Commerce, Mr Rajiv Kher, said that EPO services are India's next billion-dollar opportunity and they are no more just an adjunct of R&D services. He said EPOs have grown by compounded annual growth rate of 37 per cent between 2003 and 2006 and their potential could be $10 to $20 billion in the next five years from the extant level of $3.5 billion. He said EEPC is conducting a study on a strategy paper for the promotion of EPO services from India.

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