Manufacturing boost: Govt brings draft of national capital goods policy

India’s share in capital goods exports is just about 0.1-0.6%, while China, Japan, South Korea and Germany account for about 7-16%

The Dollar Business Bureau

The government has come up with the draft of a national capital goods policy which seeks to double domestic production and raise exports to at least 40% of the total production, thus increasing India’s share in global exports of capital goods to about 2.5% by 2025. “This is the most critical sector for achieving the vision of ‘Make in India’ as the sector has multiplier effect on other sectors of economy. This national policy on capital goods is envisaged to unlock the potential for this promising sector and establish India as a global manufacturing powerhouse,” Ministry of Heavy Industries said in a statement on Friday. In the past few years, India’s capital goods industry has struggled to achieve its production, exports and market share targets despite Prime Minister Narendra Modi pushing hard the country’s manufacturing sector through ‘Make in India’ campaign. With the implementation of the new framework, India aims to become the top producer of capital goods in the world. The government looks to increase domestic capital goods production to Rs.5 lakh crore from its current Rs.2.2 lakh crore by 2025. “The national capital goods policy is formulated with the vision to increase the share of capital goods contribution from present 12% to 20% of total manufacturing activity by 2025,” the ministry said. India is heavily dependent on imports for meeting its capital goods requirements. The domestic production continues to suffer as there is a huge gap between India’s technology to that of other major capital goods manufacturing countries. India’s share in capital goods exports is just about 0.1-0.6%, while China, Japan, South Korea and Germany account for about 7-16%. The policy also puts emphasis on encouraging acquisitions from technologically competitive countries such as the European Union, Japan, and Taiwan; with the intent of acquiring technology know-how and manufacturing competencies. The acquisitions would help India move ahead in terms of its technological capabilities, and then it can target exports to specific countries in the Middle East and South Asia as countries in these regions don’t have effective machine tools industries. The framework will initiate higher industry involvement and trade agreements with several international markets including South-East Asia, Africa, the Middle East, the Commonwealth of Independent States (CIS), and Central & Latin America. This national policy will also help raise the share of domestic production in India's capital goods demand from 56% to 80% and improve domestic capacity utilisation to 80-90%, besides promoting skill availability, technology depth, standards, and Small and Medium Enterprises (SMEs). The successful implementation of the newly launched scheme will help India increase its domestic employment from the current 15 lakh to at least 50 lakh by 2025. This is the first such occasion when India has unveiled a policy on capital goods. The policy will be revised every five year and appropriate changes will be made according to global market demand and trend.  

October 24, 2015 | 2:57pm IST.

The Dollar Business Bureau - Oct 24, 2015 12:00 IST