Green light for first-ever policy on capital goods

NEW DELHI: IN its effort to boost the manufacturing sector in the country, the Cabinet on Wednesday approved the first-ever policy for the country’s capital goods sector, envisaging creation of over 21 million new jobs by 2025. The policy aims to increase production of capital goods from Rs.2,30,000 crore in 2014-15 to Rs.7,50,000 crore in 2025 and raise direct and indirect employment from the current 8.4 million to 30 million.

“The idea of the policy on capital goods is to see how we can make these goods in India. When China increased its share of manufacturing in GDP to 40 per cent, its capital goods manufacturing base too had gone up.  If we also make the capital goods required by the manufacturing sector, the entire economy will get a fillip,” said Union Railways Minister Suresh Prabhu.

The policy envisions increasing the share of capital goods in total manufacturing activity to 20 per cent by 2025, from 12 per cent at present.

Commenting on the development, Harshavardhan Neotia, President, FICCI said, “We are happy to see the roadmap for the capital goods sector in India and its recognition as a strategic sector. India has the potential to be the net exporter of capital goods as against the net importer currently. National Capital Goods Policy is definitely the need of the hour, which will provide the much-needed impetus to the sector and will go a long way in achieving the objectives of Make in India.”

The manufacturing output grew at its slowest pace in four months in April as new orders stagnated and input costs rose sharply. “Capital goods manufacturing if it happens in India along with the manufacturing that is going to happen downstream, the entire economy gets a fillip. It will also play a pivotal role in overall manufacturing as the pillar of strength to the vision of Make in India,” Prabhu added.

“The objectives of the policy will be met by the Department of Heavy Industry in a time-bound manner through obtaining approval for schemes as per the roadmap of policy interventions,” the official statement said.

The policy envisages ramping up exports to 40 per cent of production, from the current 27 per cent. It will increase the share of domestic production in India’s demand to 80 per cent from 60 per cent, which would make the country a net exporter of capital goods. It also seeks to facilitate improvement in technology depth across sub-sectors, increase skill availability, ensure mandatory standards and promote growth and capacity building of MSMEs.

To create an ecosystem for globally-competitive capital goods sector, the policy bats for devising a long-term, stable and rationalised tax and duty structure. It also advocates adoption of a uniform Goods and Services Tax (GST) regime ensuring effective GST rate across all capital goods sub-sectors with a view to ensuring a level-playing field.

We are happy to see the roadmap for the capital goods sector in India and its recognition as a strategic sector. India has the potential to be the net exporter of capital goods.

-Harshavardhan Neotia,  FICCI President