Indian engg, R&D market to top $45 bn by 2020

India's engineering and R&D (ER&D) services market is projected to reach $40-45 billion by 2020, with export revenue of $35-40 billion and domestic revenues of $4-6 billion, and will be the next growth engine for the IT-BPO industry, according to a study.

Infrastructure, aerospace and energy are expected to constitute more than 80 per cent of the domestic revenue, said the study, "Global ER&D: Accelerating Innovation with Indian Engineering", released by National Association of Software and Services Companies (NASSCOM) in association with management consulting firm Booz & Company.

The Indian ER&D services market registered revenue growth of over 40 per cent in the last three years, with 2009 revenues amounting to $8.3 billion and an increase in the employee base from 54,000 in 2006 to 150,000 in 2009.

"India is now an epicentre for global ER&D services with a compelling value proposition based upon the growing depth and breadth of services, flexible business models, large engineering base and global footprint with greater proximity to customers," NASSCOM President Som Mittal told a press conference on the sidelines of the "NASSCOM Engineering Services Conclave 2010".

The major growth triggers have been identified as continued ER&D investment critical for innovation and penetrating new markets, increased use of electronics, fuel efficiency or alternate fuels, convergence of technologies driving future ER&D spend and greater focus on emerging markets as a result of the rise of a new consumer segment with varied requirements.

The study said global ER&D spend surpassed $1 trillion in 2009 and is expected to touch $1.4 trillion by 2020. The automotive, consumer electronics and telecom sectors are the top spenders on ER&D.

Booz & Company Partner Vikas Sehgal said the industry has the potential to create more than five million employment opportunities in engineering and related fields.

However, it said collaborative stakeholder action would be imperative to achieve the $40-45 billion target by 2020.

"Focused investments are required to capture new markets, deepen capabilities within verticals and build services portfolio across the product development value chain," the report added.