India’s growing manufacturing sector props up industrial automation equipment demand, despite global slowdown


By Nitin Sharma, analyst, manufacturing technology, IHS Markit.

Despite a worldwide slowdown in the growth of the industrial automation equipment (IAE) market, the strong expansion of India’s manufacturing sector is allowing the global IAE industry to remain on an expansion trajectory in 2019.

Annual IAE market revenue growth will decrease to 3.2 percent in 2019, down from 4.7 percent worldwide in 2018. Globally, IAE demand growth is being diminished by weakening conditions both in the manufacturing industry and in the economy at large. In contrast, India is experiencing a robust rise in its industrial sector, driving demand for automation in factories.

“Even as IAE growth decelerates throughout most of the world, India’s market is experiencing growth as its economy and industrial market continues to generate strong growth,” said Nitin Sharma, analyst, manufacturing technology, at IHS Markit. “Despite challenges including poor infrastructure, difficulties in land acquisition, complex taxation laws and supply chain inefficiencies, India is becoming an increasingly attractive location for manufacturing. Moreover, government initiatives like the ‘Make in India’ program and incentives for various manufacturing companies are creating an environment conducive to accelerating manufacturing sector growth.”

India’s manufacturing boom

India’s real gross domestic product (GDP) is projected to increase by 6.6 percent in fiscal year 2019, which started April 1. Another 6.8 percent increase is expected in fiscal year 2020. 

In May, the Nikkei India Manufacturing PMI rebounded to 52.7, up 0.9 points from April. The rise in PMI was driven by the expansion in consumer goods industries. 

Manufacturing output, total new orders, export orders, and employment also have accelerated. With India’s economy and manufacturing sector on the rise, demand for more industrial automation equipment is set to increase as well.

Government boosts Indian manufacturing

The Indian government’s measures to improve industrial policies are fueling growth in 25 key industrial sectors, including electronic systems, electrical machinery, automotive, aviation, defense and pharmaceuticals. These measures include increasing foreign direct investment (FDI) limits, simplifying labor laws, promoting skill development and easing the process of doing business.

India’s mobile phone manufacturing industry is a good example of these efforts. 

Under the government’s “Make in India” program, various initiatives have been undertaken to establish a robust mobile phone manufacturing ecosystem in India. The Phased Manufacturing Programme (PMP) is one such initiative wherein indigenous mobile manufacturing is promoted via fiscal and financial incentives.

Recently, companies like Foxconn and Samsung have established major manufacturing facilities in the country. By 2018, Imports of the electronic devices in the country had been reduced to less than half of total domestic consumption and India had become the world’s second-largest mobile phone manufacturer after China, replacing Vietnam. 

The government’s “Make in India” initiative is also supporting expansion and localization efforts for several established car manufacturers. IHS Markit forecasts light vehicle production will reach more than 4.8 million units in 2019, up 8 percent from 2018.

Automation suppliers target Indian market

With a growing manufacturing sector backed by key government initiatives, India has become an important market for automation suppliers.

Worldwide programmable logic controller (PLC) market revenue is forecast to grow by 3.3 percent and 3.6 percent in 2019 and 2020 respectively, according to the IHS Markit PLCs Intelligence Service. In contrast, the Indian market is expected to grow by 7.9 percent and by 9.9 percent in 2019 and 2020 respectively. 

Worldwide revenue for the industrial PC market is forecast to grow by 3.1 percent and 1 percent in 2019 and 2020 respectively, per the IHS Markit Industrial PCs Intelligence Service. However, in India, revenue is expected to grow by 7.1 percent and by 5.3 percent in 2019 and 2020 respectively. The service also forecasts point of sale/point of information (POS/POI) applications will be the second-fastest growing sector for industrial PCs globally, with a revenue CAGR of 4.1 percent from 2017 to 2022. The modernization of the retail sector in India, such as the establishment of supermarkets and hypermarkets, will continue to contribute to the growth in this segment.

According to the IHS Markit Industrial Edge Networking Components Intelligence Service – Annual, the revenues for Industrial edge networking components  in India are forecast to grow fastest in the Asia-pacific region. The high rate of growth forecast for the economy and industrial manufacturing base in India will drive the increased adoption of industrial Ethernet communications. 

Industrial Automation Equipment Market Tracker

IHS Markit’s Industrial Automation Equipment Market Tracker represents an in-depth quarterly market tracker with a comprehensive evaluation of the global Industrial automation equipment market. A detailed overview of the major equipment markets is included for Europe, the Middle East and Africa (EMEA), the Americas, China, Japan and the rest of Asia. The Industrial Automation Equipment Market Tracker includes industry sector analyses and a comparison of revenue growth in the market. The report also details key underlying growth factors such as global capital expenditures, global machinery production, real GDP and industrial production. Market shares for leading vendors in the major equipment markets are also included.

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