Capital goods consist of plant machinery, equipment and accessories required, either directly or indirectly, for manufacture or production of goods
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| What are capital goods? | Capital goods consist of plant machinery, equipment and accessories required, either directly or indirectly, for manufacture or production of goods or for rendering services, including those required for replacement, modernization, technological upgradation and expansion of manufacturing facilities. |
| What is the significance of capital goods sector? |
2. It provides the foundational building blocks for a large number of user industries by providing critical inputs, that is, machinery and equipment, necessary for manufacturing. Hence act as a multiplier effect. 3. Capital Goods sector is also a major employment driver, with 15,00,000 people employed across various sub-sectors. 4. The sector can help in reducing the trade deficit. The Capital Goods sector imports are substantial at US$20 Bn. An increase in high value capital goods exports and reduction of imports can play a pivotal role in improving India’s trade balance with such countries and reducing the country’s current account deficit. |
| What are the issues faced by capital goods sector in India? | The issues are divided in different segments such as:
1. Issues affecting domestic demand creation: Key challenges include: Lack of positive bias towards domestic value addition in public procurement policies; Difficult contract conditions; Persistent import and use of second-hand machinery with no incentive for replacement,; Zero duty import under ‘Project Imports’ and Delays in project implementation. 2. Issues affecting exports: Key challenges include the inadequate availability of competitive short and long-term financing, non-tariff barriers in export markets denying market access and limited understanding of international market requirements especially by smaller players. India also needs to align its trade policy to the shift in India’s export map towards developing regions. More trade agreements are needed with developing countries where India has a comparative advantage. 3. Issues affecting technology depth: Significant challenges and gaps exist in high-end, heavy-duty, high-productivity and high precision technologies across sub-sectors. Contributors to these gaps include low end user acceptance of new Indian technology, lack of skill availability, weak support infrastructure and low Indian participation in developing international standards. Further, patent processing takes very long and fiscal incentives for R&D are still inadequate. 4. Issues affecting cost competitiveness: Indian manufacturers are challenged with respect to cost competitiveness compared to their global peers due to a skewed and state-wise variation in tax and duty structure, prevalence of inverted duty structure for several products and high infrastructure and logistics cost. |
| What are the salient objectives of the new policy? | The objectives of the National Capital Goods Policy are to:
1. The objectives of the National Capital Goods Policy are to create an ecosystem for a globally competitive capital goods sector and achieve total production in excess of Rs. 7.5 lakh crore by 2025 from the current Rs. 2.3 lakh crore. 2. The objectives are raising direct and indirect employment from the current 8.4 million to ~30 million by 2025. 3. The policy envisages increasing exports from the current 27 percent to 40 percent of production. 4. It will increase the share of domestic production in India’s demand from 60 percent to 80 percent thus making India a net exporter of capital goods. 5. The policy also aims to facilitate improvement in technology depth across sub-sectors, increase skill availability, ensure mandatory standards and promote growth and capacity building of MSMEs. |