As per one of the recent reports ´impatience was creeping in among business men as nothing has changed on the ground in the first nine months of Modi government´; and if we assess the time period for this ´impatience´, it is not the couple of months these ´business´ communities have looking for some action from the government, but it has been over a couple of years! Opportunities are aplenty. There is about $7.5 trillion worth of projects underway across all emerging markets globally, according to the AEM´s Project Database provided by BMI. Most projects are located in the emerging Asia Region (China and India). However, comparing the activity to the size of the economies paints a different picture as Asia falls far behind the Middle East and North Africa (MENA) and Sub-Saharan Africa (SSA). Looking at the infrastructure industry, a main driver behind construction equipment, India is ranked 7th in terms of risk vs reward. There is a high implied growth and a large industry value in the construction sector, though it falls short in terms of overall country rewards and scores poorly when we look at the overall risks. Will the ´Make in India´ move be able to push the agenda of global manufacturing competence?
India is in great need to improve the quality, productivity and capability of its manufacturing industry; and ´Make in India´ drive is a perfect platform to achieve this target. When it comes to mining and construction equipment sector, there is a lot to be done on ´Make in India´ front. As per industry inputs, high-value aggregates like hydraulic pumps and motors, slew rings etc, continue to be imported; the casting facilities in India still are nowhere near the global standards; even diesel engines need to move to the next level of quality, efficiency, reliability and homologation. As the domestic demand is bound to increase, investment in these areas is the way forward and this will give the construction and its allied sectors a bigger global market to cater to. No doubt, ´Make in India´ campaign is one of the major national programmes which has been designed to facilitate investment and establish India as a global manufacturing hub. Moreover, this will push for necessary policy reforms which will make it easier for prospective investors (domestic and international) to explore India as a business destination, particularly for infrastructure building equipment. It will also foster innovation, create employment opportunities and will protect the intellectual property right.
However, challenges are aplenty, the most important being optimization of cost. At the same time, ensuring global quality - not just the OEM quality but the vendor quality - again depends on the skill levels of the workforce of the vendors. Supply chain management and quality are interlinked and here a lot of effort is required on skill development of vendors at the OEM levels to ensure that quality is maintained, and one is able to offer products at competitive prices.
With the Union Budget round the corner, and with certain ambitious projects to be announced, the construction equipment sector looks all set to grow at a CAGR of nearly 15 per cent up to 2020. A couple of things that add credence to this optimism include the recently conducted e-auction of coal mines which has received a commitment of over $17 billion in auction proceeds, royalties and tariff cut benefits and the Coal India´s drive to reach an output of one billion tonne which is likely to step up mining activity. With the world looking at India as indicated by the recent financial commitments from major economic powers such as Japan, China, Russia and the US, coupled with a clear intent shown by the Indian government, this level of growth looks completely plausible. And there is no logic to believe that if India can launch a satellite into space for tenth of the cost as that of NASA, there is no reason why we cannot dominate in almost every other field.
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