Mumbai: Drawn to India by an explosion in metro-rail projects, Alstom SA and Bombardier Inc are now poised to use the nation known for being the world’s back-office as a manufacturing export hub.

The French and Canadian multinationals set up manufacturing and engineering operations between 2008 and 2010 to tap into India’s rapidly-growing urban transportation market and will now export to Australia, the Middle East and Asia from these facilities, company officials said. PricewaterhouseCoopers estimates total investments in subway projects will reach $230 billion in Asia over the next 15 years.

Alstom and Bombardier want to exploit India’s large pool of engineers and cheap skilled labour that have helped turn the nation into a key centre for auto companies including Ford Motor Co. and Hyundai Motor Co.

New export avenues such as metro rail systems are critical to Prime Minister Narendra Modi’s promised economic rejuvenation. Shipments from Asia’s third-largest economy must grow about 15% a year to ensure the pace of expansion needed to create sufficient jobs, according to Modi’s top economic adviser Arvind Subramanian.

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Sydney is going to be Alstom India’s first project in Australia and it will supply railway coaches from the South Asian nation, said Bharat Salhotra, the company’s managing director for the region. “We will continue to look at India, not just for addressing the Indian market but for addressing markets beyond. Exports will continue to be on the radar."

Alstom will fill the Sydney metro orders from its manufacturing units in south India and is looking at the Middle East and Southeast Asia, he said.

Cost competitive

Bombardier has invested about €33 million in its Indian manufacturing facility and has orders to export 450 metro rail coaches to Australia and components to Brazil, Australia and Saudi Arabia, Harsh Dhingra, chief country representative of Bombardier India said in a phone interview.

The Quebec-based company has manufacturing capacities in Gujarat state in western India and a transportation engineering services centre in Gurgaon, near New Delhi.

“We will look at opportunities to export from India to other countries in the region," he said. “India is a low-cost set up. That is why our exports are going out of India."

Bombardier’s India unit got its first export order in 2012 for supply of components for trains in Adelaide and has since supplied components and railway coaches for projects in Victoria, and Queensland in Australia, Sao Paulo in Brazil, and Riyadh in Saudi Arabia. It is also providing engineering services for its parent’s projects in Germany, Switzerland, China and UK.

India has already emerged as a base from where the likes of Hyundai, Ford, Renault SA and Suzuki Motor Corp. export cars to Africa, South America and Europe. The South Asian nation shipped 3.5 million vehicles in the year ended March 31, just below a record in the previous year, according to the Society of Indian Automobile Manufacturers.

While the government has tried to spur the manufacturing sector via its “Make in India" push, the nation still ranks 130th in the World Bank’s ease of doing business ranking, slowing the pace of investment. It has fared better on the services side: The information technology industry is the nation’s largest private-sector employer, providing a livelihood to nearly 4 million.

Future path

The domestic and regional opportunity for transportation companies only looks to be growing.

At least ten Indian cities are working on metro railway projects and the government initiated a plan in 2012 to study the feasibility of such networks in all cities with a population of more than 2 million. Most cities with ongoing projects require companies that bid for supply contracts to manufacture in India, which led to the setting up of facilities in the country.

More than Rs500 billion ($7.7 billion) worth of metro projects are underway in India and this pile will probably grow, according to Manish Agarwal, leader - infrastructure at PricewaterhouseCoopers. “All of this implies sufficient scale for parts of manufacturing to be located in India," he wrote in an emailed response to questions. “The manufacturing base can then also serve the growing market in other parts of Asia (Dhaka, Colombo, etc.) as also Africa (Mauritius, among others)."Bloomberg

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