Infra push boosts demand for core engineering skills

A quick survey in the industrially-backward eastern India shows that even the second and third-rung institutes are witnessing a 50 percent rise in job offers in the 2023 placement season. Railway rolling stock makers, auto, electric vehicles (EV), consumer durables, electrical appliances, etc are taking the lead in recruitment. A top automaker recruited a few students at Rs 50,000 a month – which is high by national standards from a less-prominent private institute in eastern India. In the past, such opportunities were reserved for the IITs and NITs.

A lesser-known engineering college in the outskirts of Kolkata placed budding mechanical engineers in the Rs 30,000 per month bracket, almost double the 2022 average. A prominent consulting firm recently went shopping for core engineering students at an IIT in eastern India. They didn’t find any takers. 

Impact Of Infrastructure Creation

Ideally, the spike in the recruitment of fresh engineers from core disciplines may be linked to both higher manufacturing potential and changing job profiles due to technology transition. In the absence of data, there is circumstantial or anecdotal evidence of both. The nine-year-long high-intensity capital spend on infrastructure has started creating growth multipliers. The steel sector held back expansion plans last year in the face of the Ukraine crisis and the related turbulence. Now with the disruptions easing, industry majors Jindal Steel and Tata Steel are back to the drawing board.

Railway rolling stock and cement companies are in capacity expansion mode. While the expansion is linear in cement, which has crossed 80 percent capacity utilisation in 2022-23; the rolling stock sector is witnessing a lot of internal displacements as well due to rapid technology upgrades by the Indian railways. Capacity expansion plans are back in the coal-based generation segment after almost a decade. Private power producers which were operating at 45-50 percent average utilisation have achieved 62 percent plant-load (PLF) in the last fiscal. A lot of activity was also noticed in the chemicals sector, which is expected to be a major gainer of the ‘China Plus One’ strategy adopted by the global industry.

The benefits of infrastructure push have started percolating to the ground. Forging units, which are a major ancillary for the core sector, have been witnessing a sharp rise in orders both from the private and public sector buyers. The rise was noticeable in the last few months. A major forging unit in eastern India has its order book full for the next one and a half years. A smaller unit, which had a pre-pandemic turnover of Rs 10 crore reported three times higher orders. It is now gearing up for expansion.

Consolidation In The SME Sector

Meanwhile, investment bankers reported rapid consolidation in the small and medium (SME) sector. Smaller companies with sound product lines but weak finances are being acquired by bigger players. Many of these SMEs pulled shutters during the pandemic. The small and medium sectors was undergoing restructuring since the introduction of the goods and services tax (GST) in 2017. Consolidation will give it the benefits of scale. While acquisitions will keep the job market rolling, there may be some displacements as well.

There is a rise in enquiries from mid-scale German engineering outfits for relocation opportunities in India through joint ventures. According to Subhendu Moitra of Coeus Advisors, German manufacturers had been relocating to lower-cost destinations for many years. For the first time, there has been a strong intent to relocate to India. 

The buoyancy in the domestic economy may also be helping India’s export-oriented IT industry to compensate for part of the business loss due to economic turbulence in the West. Several players reported a rise in orders from India and Asia outside China. Some orders are also diverted from China to India. A multinational IT consultant confirmed the trend. On an average year, the company’s revenue varies with the change in fortunes in the US. But this year was different. They got a major order from India as well.

RBI Should Support Growth

Early trends indicate that the growth momentum is consolidating in India. While exports are dependent on a range of external factors, the domestic market scenario is surely looking up. India failed to optimise growth potential during the UPA-era boom. Coal-power capacities increased but fuel production did not. Highway and rail modernisation suffered. The economy ended up with idle capacities and bad debts. The outflow of foreign direct investment (FDI) exceeded the inflow.

The situation has vastly improved. High logistics efficiency, steady rise in GST collection, growth in e-commerce, solar power generation, EV transition, robust export performance and widening of the manufacturing basket indicate qualitative change. What is left to be done is converting this potential into a steady flow of private investments. For the moment there are two major hurdles in this direction: The high rate of interest and the 2024 General Elections. The clock is ticking for the Reserve Bank of India to do a tradeoff between concerns for inflation and investment opportunities. India has to wait for another year for clarity on political outlook.

Pratim Ranjan Bose is an independent columnist, researcher, and consultant. His Twitter handle is @pratimbose. Views are personal, and do not represent the stand of this publication.