The engineering and capital goods industry is considered the foundation of India’s industrial ecosystem. This sector supplies essential machinery and equipment to various core industries. In India, it not only drives industrial growth but also plays a crucial role in employment generation, exports, and technological self-reliance. The capital goods sector contributes around 1.9% to India’s total GDP, highlighting its strategic importance.
In today’s spotlight, let us explore India’s engineering and capital goods sector and understand how it has become a key pillar of the country’s growth.
Current Status of the Engineering and Capital Goods Industry
India’s engineering and capital goods industry is regarded as the backbone of the country’s industrial ecosystem. It has a direct linkage with sectors such as infrastructure, power, manufacturing, automobiles, defence, and mining. The industry not only supplies machinery and equipment but also enables industrial capacity building and supports long-term economic growth.
The turnover of the capital goods sector stood at US$ 92 billion in 2019. At the production level, sector output increased from Rs 2.29 lakh crore in CY15 to Rs 4.29 lakh crore in CY24, reflecting nearly double growth
Electrical equipment is the largest sub-segment in India. Its market size was US$ 52.98 billion in 2022 and is expected to reach US$ 124.83 billion by 2027, indicating a CAGR of 11.68%. This growth is supported by investments in power generation, expansion of transmission and distribution networks, and rising renewable energy capacity.
On the industrial activity front, the Index of Industrial Production (IIP) stood at 153.3 in June 2025, compared with 151.0 in June 2024. The indices for manufacturing, mining, and electricity were recorded at 152.3, 123.2, and 217.1, respectively, indicating steady demand for engineering and capital goods.
India’s Engineering Research and Development (ER&D) services market is also expanding rapidly. The market size is estimated at Rs 11.42 lakh crore (US$ 133.71 billion) in 2025 and is expected to reach Rs 18.62 lakh crore (US$ 217.90 billion) by 2030, growing at a CAGR of 10.26%. This trend positions India not only as a manufacturing base but also as a global hub for engineering design and technology development.
Key Segments of the Engineering Industry
The Indian engineering industry is divided into two main segments: heavy engineering and light engineering.
Heavy engineering includes machine tools, textile machinery, cement machinery, and other industrial equipment. Driven by rising automation demand, India’s automated material handling market is projected to grow from Rs 14,546 crore in 2025 to Rs 26,376 crore by 2030. This segment strengthens infrastructure, manufacturing, and the construction sector.
The light engineering segment is largely MSME-driven and includes casting, forging, medical devices, and industrial fasteners. India’s foundry market was valued at US$ 19.46 billion in 2024 and is expected to reach US$ 31.77 billion by 2029. In medical devices, India is the fourth-largest market in Asia, while the industrial fasteners market is projected to reach US$ 108.88 billion by 2030.
Strong Growth in India’s Engineering Exports
The engineering sector contributes nearly 25% of India’s total goods exports and is a major foreign exchange earner. In FY25, engineering goods exports stood at Rs 9,86,328 crore (US$ 116.67 billion).
During this period, the USA, UAE, Saudi Arabia, Germany, and Italy emerged as India’s key export destinations. Looking ahead, rising global demand and supply chain diversification are expected to push engineering exports to US$ 200 billion by 2030, highlighting the sector’s long-term strength.
Government Policies and Initiatives
Government policies and initiatives have played a critical role in the growth of India’s engineering and capital goods industry. The government’s clear focus is on making this sector a driver of manufacturing, exports, and technology upgradation.
Capital Goods Competitiveness Scheme – Phase II: A total outlay of Rs 1,207 crore, including Rs 975 crore as government support and Rs 232 crore as industry contribution. The scheme focuses on technology centres, testing facilities, and Industry 4.0 adoption.
FDI and De-licensing: The engineering sector is fully de-licensed, with 100% FDI allowed in most segments, strengthening the presence of global companies in India.
Make in India, NIP, and SEZs: More than 15 engineering SEZs have been approved to support infrastructure development and export-oriented manufacturing.
Upcoming Union Budget: According to The Economic Times, the government is considering an incentive package of Rs 23,000 crore in the upcoming budget to boost domestic capital goods manufacturing. The aim is to reduce import dependence, strengthen local supply chains, and accelerate technology indigenisation.
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Future Outlook
India’s engineering and capital goods sector is well positioned for strong growth. The electrical equipment market is expected to expand by nearly US$ 33 billion by 2025, while the ER&D services market is projected to reach US$ 217.90 billion by 2030.
The construction equipment market may grow from Rs 69,046 crore in 2025 to Rs 1,02,827 crore by 2030, with sales expected to cross 1,65,000 units by 2028.
Rapid expansion is also underway in power, automobiles, and EV segments. Engineering goods exports are likely to reach US$ 200 billion by 2030, making this sector a key driver of India’s long-term economic growth.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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