India targets $45 bn from engineering services by 2020.

BANGALORE: Riding high on its success in software and back-office services globally, India has set a $45-billion revenue target from engineering research and development (ER&D) services by 2020.

"The resilient Indian engineering industry is poised to achieve $40-45 billion by 2020, with $35-40 billion from exports. It will be a quantum jump from $8.3-billion in 2009 from exports, growing at 40 percent average during the last three years," National Association of Software and Services Companies (NASSCOM) president Som Mittal said here Thursday.

Export revenue from ER&D services grew by a whopping 700 percent in five consecutive years from $1.2 billion in 2004 despite cyclical contractions and global meltdown in 2008-09.

Unlike in the software services segment, ER&D deals with hardcore design, development and manufacturing of products and services spanning diverse sectors, including infrastructure, aerospace, power, automotive, oil and gas, consumer electronics and utilities.

A study by Nasscom and management consulting firm Booz & Co says global ER&D spend crossed $1 trillion in 2009 and is projected to touch $1.4 trillion by 2020.

"The engineering services landscape in India has evolved significantly during the last four years, reflecting maturity, diversification and enhanced verticalisation to partner with global corporations," Mittal told reporters on the margins of a conclave on ER&D services here.

Besides IT bellwethers such as Tata Consulting Services (TCS), Infosys, Wipro and HCL, multinationals and their captives are scaling up their capacity to cash-in on the emerging opportunities in existing and new verticals.

As representative body of the Indian IT industry, Nasscom has estimated that the industry would require about 500,000 engineers to generate the targeted $45 billion from ER&D services by 2020 from 150,000 engineers in 2009.

"Talent and capacity building are the twin challenges the industry faces besides competition from cost-competitive countries in Europe, Latin American and Asia-Pacific region," Mittal noted.

Highlighting the key findings of the study, Booz partner Vikas Sehgal said strategic focus and investment in ER&D has the potential to transform India into an engineering powerhouse and make engineering a key growth driver over the next decade.

"Focused investments are required to capture new markets, deepen capabilities within verticals and build services across the product development value chain. The priority should be to build complete product development ecosystem while flagging Indian engineering capabilities to the world," said Sehgal.

Mittal said the domestic market had evolved to meet the emerging opportunities, with the industry investing in building capabilities and entrenching in customer value chain.

Source : THe Economic Times