India hydraulics components mkt attracts MNCs

MUMBAI, INDIA: The rapid boom in Indian infrastructure industry, along with the more moderate growth of the manufacturing sector, has stabilized the demand for hydraulic components in India, according to an analysis by Frost & Sullivan.

The government's planned investment of Rs. 45 trillion in infrastructure in the 12th five year plan (2012-2017) will be a major boost to construction equipment and thereby, hydraulic components, it further said.

The analysis finds that Indian hydraulic components market was valued above Rs. 18 billion during 2010 and is likely to grow at a compound annual growth rate of more than 14 per cent from 2011-17 to cross Rs. 50 billion.

Mirroring the two-fold increase of sales in the construction equipment market by 2015, the market for hydraulic components in construction and bulk material handling will also double during that period. The increased investments and expansions in core sectors such as infrastructure, steel, cement, mining, as well as oil and gas is driving the market for ancillary products such as hydraulic components.

“Emphasis on the Indian power sector is also expected to give a leg up to the hydraulic component market,” says Frost & Sullivan analyst. “With rapid capacity additions and expansions, the market is anticipated to grow by more than 15 per cent over the next five years.”

However, despite the projected double-digit growth rate, the absence of reliable tube suppliers for hydraulic cylinders, low availability of raw materials, and competition from the unorganized sector restrains further growth of the hydraulic components market.

Raw materials account for almost 50 per cent of the total cost of the hydraulic component. Consequently, escalating input costs directly affects the margins of component manufacturers. The scarcity of raw materials results in higher costs, compounding the challenge for component manufacturers.

The trend to source from low-cost countries has gained momentum, and India, with its rich experience in manufacturing, large pool of skilled manpower, and ever increasing domestic volumes, has made the most of this environment to become a manufacturing hub for the global market. This new status will result in many multinationals clamoring to set up manufacturing facilities in India.