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Catalyzing Domestic Production and Technological Innovation
Introduction
According to the Ministry of Heavy Industries, heavy engineering and machine tools sector comprises of capital goods industry. India's capital goods sector is experiencing significant attention due to its critical role in driving industrial growth and economic development. This sector encompasses industries such as electrical equipment, machinery, and construction, which are essential for the country's infrastructure development. According to the Indian Electrical and Electronics Manufacturers’ Association (IEEMA), the electrical equipment industry witnessed consistent double-digit growth in power equipment, particularly transmission equipment and transformers, driven by domestic demand and international market expansion.
India is the third-largest market for construction equipment. Government initiatives have been instrumental in bolstering the capital goods sector. The Ministry of Heavy Industries has launched several policies to boost domestic production and reduce reliance on imports. These initiatives are part of the broader Make in India campaign (launched in 2014), which seeks to increase the manufacturing sector's contribution to GDP, generate employment, and improve technological capabilities. The capital goods sector is crucial to India's economic strategy, supporting large-scale manufacturing and infrastructure projects. With rapid urbanization, extensive infrastructure development, and strong government support, the sector is poised to drive sustainable industrial growth and elevate India's position in the global market.
Overview of the Heavy Industries and Engineering Sector
As per the present estimates, the Capital Goods industry contributes about 1.9% of GDP. The Heavy Engineering and Machine Tool sector (capital goods industry) consists of the following major sub-sectors: Dies, Moulds and Press Tools; Plastic Machinery; Earthmoving and Mining Machinery; Metallurgical Machinery; Textile Machinery; Process Plant Equipment; Printing Machinery; and Food Processing Machinery. Due to catalytic effect of Ministry of Heavy Industries intervention, the production of capital goods sector has increased from Rs 2,29,533 crore in 2014-15 to Rs.4,29,001 crore in 2023-24. Production (in crores) by the sub-sectors of capital goods industry since 2019-20 are presented in the table below:
Exports (in crores) by the sub-sectors of capital goods industry since 2019-20 are presented in the table below:
The policy environment for the capital goods sector includes:
The Union Budget 2025-26 proposes to add 35 additional capital goods for EV battery manufacturing, and 28 additional capital goods for mobile phone battery manufacturing to the list of exempted capital goods. This will boost domestic manufacture of lithium-ion battery, both for mobile phones and electric vehicles.
National Capital Goods Policy (2016)
The National Capital Goods Policy, formulated by the Ministry of Heavy Industries & Public Enterprises, is a comprehensive framework aims at boosting the capital goods sector in India. policy envisions increasing the sector's contribution to manufacturing activity from 12% (2016) to 20% by 2025. It seeks to make India one of the top capital goods producing nations, aiming to more than double production and increase exports to at least 40% of the total production. Furthermore, the policy aims to enhance the technology depth within the sector, moving from basic and intermediate levels to advanced levels.
The major salient features of the policy are:
The National Capital Goods Policy, 2016, inter alia, recommended increasing the budgetary allocation and scope of the Scheme on Enhancement of Competitiveness of Capital Goods which included setting up of Centers of Excellence, Common Engineering Facility Centers, Integrated Industrial Infrastructure Park and Technology Acquisition Fund Programme. These recommendations were incorporated in the Phase II of the scheme.
Scheme for Enhancement of Competitiveness in the Indian Capital Goods Sector Phase I
In order to address the skill gaps, infrastructure development and technology needs for the capital goods sector, Phase I of the capital goods scheme was rolled out in November 2014 which had the total outlay of Rs 995.96 crores. Phase I of the scheme fostered partnerships between academia and industry for engendering technology development with government support. The outcome of the Scheme has proved the efficacy of the strategies deployed for technology and industrial infrastructure development.
Under Phase- I of the Scheme for Enhancement of Competitiveness in the Indian Capital Goods Sector, 33 projects with budgetary support of Rs. 583.312 crore were sanctioned. After launching of the Capital Goods Scheme Phase II, The Phase I of the Capital Goods Scheme has been merged with Phase II of the Scheme.
Scheme for Enhancement of Competitiveness in the Indian Capital Goods Sector Phase II
Ministry of Heavy Industries notified the Phase 2 of the Scheme on January 25, 2022, with an objective to expand and enlarge the impact created by Phase I of the capital goods scheme, thereby providing greater impetus through creation of a strong and globally competitive capital goods sector. The scheme has a financial outlay of Rs. 1207 crores with budgetary support of Rs. 975 crore and industry contribution of Rs. 232 crores. Under the Phase II, a total of 33 projects with project cost of Rs 1366.94 crores (due to higher contribution by Industry) and government contribution of Rs 963.19 crore have been sanctioned by August 2024. There are six components under the Phase II and the details of the projects sanctioned so far are:
The details of the funds allocated and its utilization under the Scheme for Enhancement of Competitiveness in the Indian Capital Goods Sector Phase- I and II is as given in the table below:
Recent Achievements of the Capital Goods Scheme
Bharat Heavy Electricals Limited (BHEL)
BHEL is a major contributor towards engineering and manufacturing capacity building for the Country. The company is carrying out following initiatives with support from Ministry of Heavy industries under the Capital Goods Scheme Phase II:
• BHEL has established a “Common Engineering Facility Centre (CEFC)” for skill development in Welding Technology at WRI Trichy along with its extension centers at Varanasi, Ranipet, Bhopal, Jhansi and Haridwar units of BHEL.
• BHEL is establishing a testing facility comprising both Hardware in the Loop (HIL) and Software in the Loop (SIL) functionalities in the area of Industrial, Naval and Aircraft related processes at its Corporate R&D Unit at Hyderabad with support from Ministry of Heavy Industries.
Conclusion
The ‘Make in India’ initiative has had a transformative impact on the heavy industries and engineering sector. By fostering technological advancements, increasing domestic production, enhancing competitiveness, and generating employment, the initiative has played a pivotal role in strengthening India’s industrial base. With sustained policy support and continued investment, the sector is poised for further growth in the coming years.
References
https://www.investindia.gov.in/sector/capital-goods
https://pib.gov.in/PressReleseDetail.aspx?PRID=2098364
https://pib.gov.in/PressReleasePage.aspx?PRID=2085938
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2042179
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2039020
https://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf
https://heavyindustries.gov.in/heavy-engineering-and-machine-tool
https://x.com/investindia/status/1302798627337723904?lang=ar-x-fm
https://heavyindustries.gov.in/sites/default/files/2023-07/Capital-Goods-Policy-Final.pdf
https://sansad.in/getFile/loksabhaquestions/annex/184/AU1227_CBVr5x.pdf?source=pqals
https://sansad.in/getFile/loksabhaquestions/annex/182/AU1375_e9YzYN.pdf?source=pqals