The core pattern: output, firms, and even concentration are all moving the same way
Engineering Goods and Machinery does not show the divergence between output and firm health seen in some other sectors. Factories grew from 12,281 to 14,393 (2014-15 to 2023-24), GVO nearly tripled from ₹2.73 lakh crore to ₹7.68 lakh crore, and the IIP index reached an all-time high of 133.3 in 2025-26, above its pre-COVID peak of 123.4. Financial performance of tracked firms improved alongside it: PAT margin rose from 0.9% (2014-15) to 8.2% (2024-25), ROE from -0.6% to 12.3%, and debt-to-equity fell from 0.50x to 0.23x.
Concentration at the top of the sector has also moved in a benign direction, which is not always the case elsewhere. The top-3 firms' combined share fell from 21.4% to 14.4% over the decade, and HHI fell from 285.4 to 141.9, both comfortably inside the "Competitive" band and drifting further into it rather than out of it. Even so, the sector's IIP performance is only mid-table among the ten tracked manufacturing sectors in this series: 7th by index level, 6th by latest growth, 6th by CAGR, and 5th-most volatile. The post-COVID recovery phase (2020-21 to 2025-26) has been unusually strong, a 7.58% CAGR against a 2.01% full-period CAGR, but this follows a real shock: a 14.1% single-year decline in 2020-21.
Trade: the one place the story is not improving
Engineering Goods and Machinery runs a persistent and widening trade deficit, unlike sectors with a trade surplus story to tell. The deficit stood at ₹1.60 lakh crore in FY24-25, with imports (₹3.64 lakh crore, growing 13.9% year on year) outpacing exports (₹2.04 lakh crore, growing 7.8%) by a wide margin, and import dependency at 64.1%. Over a longer five-year window the picture is more mixed: export CAGR (14.6%) has actually run slightly ahead of import CAGR (13.4%), so the gap is a legacy structural one rather than one that is accelerating on every measure. China's position in the trade data is stark: it supplies ₹1,56,058 crore of imports, roughly 8.5 times the next-largest import source (USA, ₹18,324 crore), while ranking only 4th among export destinations (₹8,489 crore). Firm-level financials show the same turn: aggregate Net Forex was strongly positive through 2021-24, peaking at ₹45,125 crore in 2023-24, before flipping to −₹2,083 crore in 2024-25.
Investment and PLI: private-sector-led, with no policy incentive at all
Engineering Goods and Machinery sits entirely outside the Production-Linked Incentive framework, since no PLI scheme covers general machinery (NIC Division 28) as a distinct category. Investment is instead funded almost entirely by private capital: Indian Private Sector investment (₹2,765 crore in 2024-25) roughly 1.8 times Foreign Private (₹1,547 crore), with combined government investment under 5% of the total. The sharpest one-year deterioration in this snapshot appears here: dropped-investment cost more than quintupled from ₹1,120 crore (2023-24) to ₹5,732 crore (2024-25), and the dropped-project count nearly quadrupled (7 to 27) in the same single year. Total outstanding investment stock stood at ₹25,810 crore across 103 projects, of which ₹2,830 crore across 5 projects is classified Implementation Stalled.
Geography: Maharashtra's scale, Karnataka's wage premium
Maharashtra leads by scale (24.4% of national GVO, ₹1,87,129 crore, 2,241 factories) followed closely by Tamil Nadu (17.9%) and Gujarat (17.7%, and the highest factory count of the top-5 at 3,221). But Karnataka, only 4th by GVO share (7.4%) and with the fewest factories of the top-5 (1,340), pays the highest wages per worker of any of them (₹3,21,269), ahead of even Maharashtra. This tracks the state's cluster profile: Bengaluru's Peenya Industrial Area is described as India's largest machine-tool cluster by production value, a more precision- and skill-intensive segment than the higher-volume production concentrated in Gujarat and Tamil Nadu, which combine large factory counts with the lowest wages per worker among the top-5. The top-5 states together account for roughly 73.9% of national GVO, a tighter concentration than seen in some other sectors.
Clusters: five hubs, all inside the top-5 states
Five major Engineering Goods and Machinery clusters are profiled: Rajkot (Gujarat), Coimbatore (Tamil Nadu), Peenya-Bengaluru (Karnataka), Pimpri-Chinchwad (Maharashtra) and Faridabad (Haryana). Every one of them sits inside the top-5 states identified in the Geography section, a tight alignment between where the sector's output is concentrated and where its best-known hubs are.
R&D and PLI: a sector left to fund its own capability
R&D spend as a share of sales fell from 0.73% (2014-15) to 0.48% (2024-25), still a "laggard" by the Institute's thresholds (below 1%) and moving further into that band rather than out of it, even though it remains several times higher than the R&D intensity typical of more labour-intensive sectors. Combined with the complete absence of a PLI scheme for this sector, Engineering Goods and Machinery is, structurally, funding its own capacity growth and whatever innovation it undertakes almost entirely out of retained private earnings, with essentially no policy lever pulling in either direction.
Explore the sector: interactive mindmap
Engineering Goods and Machinery is, on most measures, an improvement story: record output, healthier firms, and a firm base that is getting less concentrated rather than more. What has not improved is the trade balance, which remains a wide and, on the latest year's numbers, widening deficit dominated on the import side by China, and there is no PLI scheme in place to help close that gap or to incentivise the modest and declining R&D spend that would help the sector compete on more than assembly.
References
Methodological Notes
Institute of Manufacturing and Economy · Sector Snapshots · August 2026 · NIC Division 28 · Primary research: Madhav Rathi · Compiled by: Riddhi Bhargava
Author's Profile
Madhav Rathi is a BSM (Honours) student in Accounting and Finance, Class of 2029. He interned at the Institute of Manufacturing and Economy and conducted the primary research for this sector snapshot.