India to deliver over 1/3 of ER&D offshoring services by 2020

ER&D services exports from India expected to reach $37-45 billion by 2020

India is expected to deliver over one-third of the global engineering and R&D (ER&D) offshoring services by 2020, according to a study conducted by industry body Nasscom in association with research and consulting firm Booz & Company. 

According to the report released here on Wednesday, ER&D services exports from India expected to reach $37-45 billion by 2020, while the global ER&D offshoring opportunity is predicated to reach $118 billion. In fiscal year 2012, Indian ER&D exports crossed $10 billion, it said.  

“The IT-BPO industry has enjoyed rapid growth. The next phase of growth will be innovation-led which will be primarily driven by engineering and R&D services exports. It is important for all the stakeholders of the industry to take a focused approach to make India competitive in the ER&D services,” said Ravi Pandit, chairman and Group CEO of KPIT Cummins.

The study said that despite global economic slowdown, digitization and demand for mobility is driving the growth for engineering research and development (ER&D) spend across all the sectors. The report said Indian engineering services providers are slowly becoming innovation partners for global companies to develop new products thus driving the growth for the sector.

It said automotive, consumer electronic and telecom are expected to the top three verticals in terms of ER&D spending by 2020 while North America and Europe would account for about 77% of the ER&D spend. The global ER&D spend which surpassed $1.3 trillion in 2001 is expected to touch $1.6 trillion by 2020, according to the study.  

“Major driver for ER&D offshoring is the shift in focus by global corporates from cost arbitrage to capability augmentation,” said Suvojoy Sengupta, Partner, Booz & Company.

The report said that the domestic ER&D opportunity is expected to see a compounded annual growth rate of 29% to touch about $7 billion by 2020. The major sectors which will drive this growth in India would be chemical, medical and automotive engineering. In addition, the government is expected to provide a boost to engineering in India through investments in infrastructure development.

The study also said that China, Brazil, Russia, Poland and Vietnam are emerging as strong competitors for offshore ER&D services.