Electrical, Automation Sectors Lead Indian Growth

Automation projects and electrical equipment manufacturing are leading the economic recovery in India’s manufacturing sector.

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The electrical equipment market in India is seeing growth that manufacturers and distributors in most other developed markets can only dream of.  The $11.3 billion industry, which sells cables, switchgears, transformers and other large electrical products, saw a major part of its growth come in the second half of the financial year ending March 31, 2010, after liquidity improved and companies resumed expansion plans.

According to the Indian Electrical and Electronics Manufacturers Association (IEEMA, www.ieema.org), the sector grew about 20 percent in the second half, compared with 1.7 percent in the first half.

“This demand growth could likely see a two-fold increase in the next two to three years,” said IEEMA Director-General Sunil More. He said this rally was due to a pick-up in housing and construction. The industry may grow 15 percent this year and could surpass the record 22 percent growth in the next financial year.

S.R. Venkatapathy, Head of Research, India, for Dedham, Mass.-based ARC Advisory Group Inc. (www.arcweb.com), observed: “Since spending on automation and electrical products in any project are equal, it was expected that growth in automation would also give a boost to the electrical sector. Also, as prices of electrical equipment are typically stable, unlike that of the automation sector, higher electrical product sales imply that projects have been revived.”

The players

Some of the companies in this sector are ABB. Crompton Greaves, L&T, Schneider Electric, Siemens, and WS Industries.  These companies have strong product and service portfolios in the automation sector too. Coming after a lull of two years, the growth in electrical will strengthen policy measures, as the government is working to restrict Chinese power equipment makers’ access to the Indian market.

Demand for power equipment is expected to rise as India is targeting at least 9 percent gross domestic product (GDP) growth for the year ahead. India has historically faced a demand-supply gap and this will feed the electrical industry.

The industry posted a 30 percent growth in the fourth quarter of the past financial year in sales of rotating machines, switchgear and cables, as a recovery in real estate and infrastructure pushed up the demand for such products. The growth in demand mainly came from industries such as power, textile, steel and cement.

About the author

Uday Lal Pai, udaylalpai@gmail.com, is a freelance journalist based in India.

ARC Advisory Group Inc.

Indian Electrical and Electronics Manufacturers Association

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