After registering a record growth in 2021-22, India’s engineering goods exports are witnessing headwinds in 2023 due to the Russia-Ukraine war which has resulted in sluggish global demand. With China Plus One policy of major global companies presenting a huge opportunity for India, the government is working on capacity building exercise. In this interview with Pratap Padode, Founder & Editor-in-Chief of Asapp Info Global Group (the publisher of Industrial Products Finder magazine), Arun Kumar Garodia, Chairman, EEPC India, elaborates on the prevailing global merchandise trade business and growth prospects for Indian engineering sector.

After a strong export performance in 2021-22, how exports scenario looks like in 2022-23?
The year 2021-22 closed with very high exports which were beyond anybody’s imagination. In the engineering sector, we were given a target of $107 billion whereas we achieved $112 billion - a great achievement by the engineering sector. Though it is said that it was because of the price rise (which of course can be a one of the reasons), there were other factors response for the growth as well. This year, though exports have been down, it is still good (given the prevailing situation due to the Russia Ukraine war).

By December 2022, we have already achieved $ 80 billion of exports. Our target 2022-23 is $ 127 billion and we are falling short of $ 47 billion, which we expect to cover in January-March quarter. The budget has given a lot of fillip for manufacturing which will give a boost to the domestic trade and lead to good export rate in the near future. The 300 million tonne steel production in India, which we aim to produce, will be ultimately consumed by the growing industrial and infrastructure sectors in India. It will also lead to export, especially of steel related engineering segments, which have been at the forefront in boosting exports last year.

But, the Russia-Ukraine war has caused massive disruption. With countries across the globe witnessing sluggish GDP growth, the demand is going to be affected.

What are your views on this year’s budget?
The Budget 2023 is good and seems to be very growth oriented. It will help in a lot of employment generation and provide opportunities for new industries to emerge. It is good for industries as a lot of fund is dedicated for MSMEs, which are one of the important contributors in the country. Today, almost half of the merchandise exports from India come from MSMEs. Our honorable Finance Minister, Nirmala Sitharaman, this time has focused on the green energy, greenfield projects and decarbonisation in the budget which is good for long-term growth. Unexpectedly, the personal taxation has also been reduced to a great extent and we can find the budget to be very vibrant this time.

The government has set ambitious targets for the industries. For instance, we have been given a target of making 300 million tonnes of steel per annum by 2030, which will take us to a big platform and bring in vibrancy in the country. In the budget 2023-24, the government has announced capital expenditure (capex) of Rs 10 trillion which is a welcome step. Other than defense projects, 50 new airports, highway and express way projects are coming up today. New gas pipelines are also being installed all over the country which is going to give a big fillip to the industry as the power sector is becoming too expensive.

The Economic Survey has warned of a slowdown in exports due to sluggish global demand in the year. How can we mitigate this challenge?
Today, global communities are interconnected. India and China - two of the vibrant economies and the world’s most populated countries - have big consumer markets. With India surpassing China in population, it will provide growth opportunity as we will have more room to grow. Our Prime Minister says Vasudhaiva Kutumbakam. So why not act on that basis, probably tomorrow we will be serving the whole world and prospering.

Russia Ukraine war is a very unfortunate crisis for the mankind. Nobody thought it is going to carry on for a long time. We hope that people come to their senses and call off this and once the war is over, we can see huge opportunities coming up. Today, due to the war, Europe is going through a big energy crisis and businesses in the region are facing huge problems. The demand in European countries and the UK is at a low ebb today. Their industries have been closing down and there is less demand for raw materials or intermediary products. We hope to see good days in the coming months.

There have been a lot of talks about China One Policy. Are you seeing the impact of it on India’s engineering sector?
There are two parts to it. Firstly, China Plus One policy has given us enormous opportunities and the whole world is looking at India now. Secondly, to take advantage of this situation, it is very important for India to develop capacities to fulfill increasing requirements of the world. Earlier, all the developed countries were buying from China in a very big way. Now they have given us an opportunity to perform that role and by building world class capacity India can become the factory of the world in the future.

India has concluded FTAs with UAE and Australia, and is holding talks with the UK, EU and other countries for preferential market access. How will these help engineering goods exports?
Free trade agreements (FTAs) will be beneficial for engineering exports from India. UAE has been importing a lot of items from China and CIS countries. But, with FTA, they have started to come to India to get their products developed. Currently, the global market is weak, but once normalcy returns, we are going to get back into the game and our business will really go up. Similarly, with Australia, FTA (Australia-India Economic Cooperation and Trade Agreement) has been effective from December 29, 2022, but we are yet to see the results. I am sure once Indian cargoes start reaching Australia, the buyers will find more interest in Indian products. We are getting good inquiries from Australia and very soon we will see the real results of this. FTAs with the UK and Canada could be signed anytime this year.

To raise the competiveness of the Indian industries, adoption of modern manufacturing technologies, including Industry 4.0 (which Budget 2023 also referred to), is critical. How is EEPC helping its members to be future ready?
With industry 4.0, a lot of new things are coming in like robotics, drones, artificial intelligence (AI), etc. Renewable is also the order of the day. EEPC has two technology centers - one in Bangalore and another in Kolkata. We are trying to help our members to equip them with technologies as per their requirement. We have signed MoUs with government’s CSIR institutes like Advanced Materials and Processes Research Institute (AMPRI), Bhopal and Central Mechanical Engineering Research Institute (CMERI), Durgapur, and National Metallurgical Laboratory (NML), Jamshedpur.

Through these tie ups with institutes; we are trying to help our members by equipping them with modern manufacturing technologies. For example, foundries generate a lot of slag, which creates disposal problem. We are working with these institutes to find ways to use slags for developing new products. There has been positive development and we have made some trial runs. Hopefully, within a one year, we expect to come up with a solution which will produce some industrial product with slag waste. This will be a big boost to the industry.

In addition to traditional export destinations, which other markets can India explore to enhance its share in the global merchandise trade?
The Commerce Minister is very supportive and has been encouraging us to look at exploring new global markets. We have made good progress in countries in South East Asia, Latin America, Africa and CIS. But due to the prevailing global slowdown and other issues, we have not seen buoyancy in these regions. I am sure once normalcy returns, you will see the business trickling down.

Are you seeing benefits of PLI scheme on the engineering exports?
Government of India announced the Production Linked Incentive (PLI) scheme to encourage local manufacturing of products, where are currently being imported into the country. As PLI schemes are targeting at import-dependent sectors, many new factories are expected to come up giving a boost not just to the domestic market but also to exports. So this will create huge opportunity for exports of engineering goods.

Finally, what is the outlook for India's engineering goods exports market for 2022-23 & 2023-24?
We have already achieved $80 billion turnover by December 2022. I'm very much hopeful that we will end up this financial year with a good figure. For next year, we are devising new plan which will be a big game changer for the engineering sector. Because of the government’s PLI schemes for multiple sectors, new production sites are coming up, which will require raw materials and components. Also, Europe will be back into the game once the Russia-Ukraine war is settled. As far as CIS countries are concerned, they had lot of logistic issues, which we are trying to sort out with help of the Government of India. We are hopeful of a strong growth in 2023-24.