India attracts global firms to its hydraulics component market

The rapid boom in Indian infrastructure industry, along with the more moderate growth of the manufacturing sector, has stabilised the demand for hydraulic components in India. The Government of India's planned investment of INR 45 trillion (US$894 billion) in infrastructure for the 12th five year plan (2012-2017) will be a major boost to construction equipment and thereby, hydraulic components.

Mirroring the twofold 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% over the next five years."

However, the absence of reliable tube suppliers for hydraulic cylinders, low availability of raw materials and competition from the unorganised sector restrains further growth of the hydraulic components market.

Raw materials account for almost 50% 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 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 clamouring to set up manufacturing facilities in India.

"The initial challenge of delivery lead times is reducing as global hydraulic component manufacturers are setting up manufacturing or assembling units in India," notes Frost & Sullivan Analyst.