Economy

Electrical machinery has huge potential for indigenisation: ISED report

Our Bureau Kochi | Updated on December 23, 2020

Global disruption of supply chain, strained relations with China have constrained the indigenous segment of the industry in India

The electrical machinery sub-sector in India has huge potential for indigenisation and for tapping a multi-million dollar market, according to research findings by the ISED Small Enterprise Observatory (ISED-SEO), at the Institute of Small Enterprises and Development.

However, in the backdrop of the global disruption of supply chains, and strained relations with China, the country’s indigenous industry remains practically constrained.

The India Micro, Small and Medium Enterprise Report, the 23rd annual publication in a series rolled out by the observatory, analyses the trend and progress of the electrical machinery sub-sector against the present slowdown in the economy.

Also read: Not all imports from China coming down

The electrical machinery sub-sector consists of two segments: 1) generation equipment (boilers, turbines, generators etc); and 2) transmission and distribution (T&D) equipment, like transformers, cables, switch gears, capacitors, energy meters etc. In India, the T&D segment constitute 85 per cent of the output; the generation equipment (GE) segment constitutes the remaining 15 per cent. The sub-sector as a whole contributes 8 per cent of the manufacturing output, and 1.5 per cent of the country’s overall GDP.

The observations made by the ‘ISED Observatory’ forms part of its comprehensive ‘Triangular Sub-sector Analysis’, based on the three identified patterns of sub-sectors by the Institute of Small Enterprises and Development. Electrical Machinery, belongs to the supply-chain sensitive sub-sectorcategory.

India imports around one-third of its electrical machinery requirements from China. Considering India’s huge emerging local demand, there is a strong case for indigenisation of T&D equipment. Significant investments in the distribution sector by the government will drive the demand for transmission and distribution equipment.

Also read: China imports: India should shun knee-jerk reaction, says SBI report

The industry has been de-licensed, and 100 per cent foreign direct investment (FDI) allowed in this sector. This has facilitated the entry of major global players into the electrical machinery industry in India.

According to projections by market researcher Technavio, the electrical equipment sector in India indicates negative growth in the short term, as the business impact of the ongoing pandemic spreads. As the markets recover, the situation is likely to improve. The company expects that the size of the electrical equipment market in India will grow by $70.69 billion, during the period 2020-2024.

Published on December 23, 2020

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