Engineering India’s growth! These five opportunities could generate $300 billion in the next 5 years

September 18, 2020 7:45 AM

Electronics manufacturing, water management, defence manufacturing, EV charging, and data centres could generate $300 billion in the next five years

Electronics exports from the country can potentially grow from $11.28 billion in FY20 to $180 billion in 2025, as some estimates suggest.Electronics exports from the country can potentially grow from $11.28 billion in FY20 to $180 billion in 2025, as some estimates suggest. (Representative image)

By Pareekh Jain

There are a lot of challenges currently, both globally and locally. At the same time, new opportunities are being created—especially in India. These opportunities have arisen because of changes in technology, law, geopolitics, and climate. Five such mega engineering opportunities in India have the potential to generate $300 bn in the next five years.

Apart from their direct contribution, these opportunities will help the extended ecosystem, including engineering service providers. Once adopted, these technologies will have the potential to solve many challenges faced by the country in various sectors. This article discusses these five mega engineering opportunities in detail.

Electronics manufacturing
Currently, India’s domestic production in the sector stands at $70 billion, accounting for just 3.3 % of the global market. This gives the country more headroom for future growth. Electronics exports from the country can potentially grow from $11.28 billion in FY20 to $180 billion in 2025, as some estimates suggest. Many nations such as the US, Japan, and South Korea are looking to shift their manufacturing supply chain from China; thus, India is likely to be a major beneficiary from such a migration.

Apart from smartphones, laptops & other electronic gadgets, there is opportunity in components & accessories such as charger, headphones, battery etc. 5G connectivity will influence electronics manufacturing in a big way through applications powered by the new-age technologies such as IoT, AI, ML, and big data among others.

In June this year, India launched an incentive plan worth $6.65 billion to boost electronics manufacturing. It will offer five global smartphone makers incentives to establish or expand domestic production. The country also plans to select five Indian firms for the PLI (production-linked incentive) scheme to produce smartphones and components worth $133 billion by 2025.

To cash in on the incentive structure, about 22 Indian and international firms, including Samsung, Lava, and Dixon have lined up with proposals for mobile phone production worth Rs 11 lakh crore over the next five years. Taiwanese contract manufacturer for Apple iPhones, Foxconn, has announced an investment worth $1 billion to expand a factory in Chennai. Similarly, another Taiwanese firm Wistron plans to invest an additional $165 million at its upcoming facility in Bengaluru.

Other players such as Samsung, Nokia, Bosch, Havells, BHEL, ITI Ltd, and Bajaj Electronics are also looking at increasing investment in this space to cash in on rising opportunities that will come out from 5G adoption.

Water management
India needs a robust water management strategy not only for drinking water but also for sustaining its agricultural growth. Advances in technology can contribute a lot in attaining both these objectives. The country will need a $100 billion investment in water in India in next five years as part of its “Nal Se Jal” scheme. The investment will be in EPC, pipes, pumps, valves, cement water treatment plants and technology, desalination etc.

As wireless sensor networks can gauge the flow of a river and monitor water quality apart from enabling its efficient distribution in urban areas, various government agencies are likely to be the major users of IoT-enabled applications. Globally, the market-size for smart water management is likely to be ~$21 billion by 2024— from about $12 billion as of now. India, with its vast water resources, contributes a significant share to this market size.

Companies such as Thermax India, Siemens India, GE Water, Toshiba water solutions, Voltas Water Solutions, and L&T are likely to be major users of this technology in the water management space.

Defence manufacturing
India was the second-largest importer of foreign weaponry after Saudi Arabia during 2015-2019, accounting for 9.2% of the total global arms imports. Now, the country aims to be self-reliant here. Under the “Atmanirbhar Bharat” initiative, the country has decided to ban the import of 101 weapons and platforms over the next seven years. It includes major armaments such as artillery guns, assault rifles, corvettes, sonar systems, and transport aircraft. These items, worth a total of $53.4 bn, are planned to be manufactured in India with local companies as prime contractors.

New technology developments will revolutionise defence manufacturing in many ways. Experts see this technology changing the use of hypersonic weapons or missiles, including those bearing nuclear warheads. Even high-speed communication is critical to activate defences in case of an enemy attack. With advanced technology playing a major role in the smart weapon development program, companies such as Bharat Forge, L&T, HAL, BHEL, and BEL are likely to be the major beneficiaries.

EV charging
Though the adoption of electric vehicles (EV) has been rather slow in India, it is receiving consistent support from the government for its future growth. EV charging requirements will grow with EV adoption. If EV adoption picks up, India will require about 4,00,000 charging stations by 2025. This translates to about $20 billion in investments.

In the initial phase, at least one EV charging kiosk will be set up at each of the nearly 69,000 petrol pumps across the country. Later, it will be expanded beyond petrol pumps. Charging stations in remote or rural areas will require complete energy systems of power backup, power quality, remote monitoring, and maintenance.

As EV adoption rises in the country, major players such as Hero Electric, Tata Motors, Ather Energy, Mahindra Electric, and Lohia Auto stand to benefit.

Globally, the EV charging stations market is dominated by Tesla, ABB, Siemens, Delta, Schneider, and Bosch. In India, Energy Efficiency Services Ltd (EESL) plays a critical role in setting up EV charging stations in a bid to boost the electric mobility ecosystem. Other players are Exicom, BHEL, and SBD who provide EV chargers to EESL.

Data centre
As 5G enables the collection of huge amounts of user data, it will drive demand for more data centres for storage. Industry estimates peg the data centre outsourcing market in India at around $2 billion as of now. This is projected to grow at a CAGR of 25% to touch $5 billion by FY24.

Currently, the top eight cities of India have 7.5 million square feet of space under various data centres. According to industry estimates, an additional 10 million square feet of space is expected to be added in the next three years. One of the major reasons for such rising demand is because 5G-enabled emerging technologies such as the Internet of Things (IoT), AI, and ML will throw up a massive amount of consumer data that will require storage. Also, the adoption of PaaS (platform-as-a-service) and SaaS (software-as-a-service) is likely to get further impetus with the rolling out of the 5G network. Such rapid migration to the cloud is expected to bring a paradigm change in the data center ecosystem.

The proposed data localisation norm of India, which mandates the storage of personal data within the country, is another factor in driving demand. India’s banking sector regulator, RBI, has already made it compulsory for financial services institutions to store data locally.

Sensing a business opportunity, big business houses and technology firms including Adani Group, Hiranandani Group, Oracle, Reliance Industries, and Microsoft have already committed more than $15 billion of investment in the next five years for setting up new data parks along with the expansion of existing ones.

CtrlS, Nxtgen, and NTT are the other major players in this space. Reflecting the optimism in this space, Hiranandani Group subsidiary, Yotta Infrastructure, launched Asia’s largest & the world’s second-largest data centre in Navi Mumbai in July, which is spread over 0.82 million sq ft of space.

This engineering investment will have a trickle-down effect and will help many ancillary and supporting industries. Engineering and R&D service providers are one such group. At a global average of 5% investment of sales in R&D, this $300 bn investment will generate engineering and R&D investments of $15 bn for the next five years. This will double the available engineering and R&D market in India for Indian service providers. These mega investment opportunities are rare; thus, firms should take advantage of these with preparation, planning, and capability development.

First published at bit.ly/3hFzszY Reprinted with permission

The author is Founder and lead analyst of EIIRTrend and Pareekh Consulting

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Fifth column: A reality check in Kashmir
2Turning the corner: Despite cancellations and empty galleries, pro golf is staging a recovery in the pandemic
3Data drive: Growth rate of infections halves