NDA readies big push for capital goods

NDA government is drawing up a Rs10,000 crore plan to boost localization of at least 10 key technologies in the capital goods sector

Amrit Raj, Utpal Bhaskar
First Published19 Jun 2014
Prime Minister Narendra Modi and his BJP have placed special emphasis on manufacturing to boost economic growth that slumped to sub-5% levels in each of the past two financial years. Photo: Bloomberg<br />
Prime Minister Narendra Modi and his BJP have placed special emphasis on manufacturing to boost economic growth that slumped to sub-5% levels in each of the past two financial years. Photo: Bloomberg

New Delhi: In an attempt to provide impetus to India’s ailing manufacturing sector, the National Democratic Alliance (NDA) government is drawing up a 10,000 crore plan to boost localization of at least 10 key technologies in the capital goods sector.

A cabinet note seeking government approval for the plan was circulated last week by the department of heavy industries.

The project, which will first start as a pilot at six Indian Institutes of Technology (IITs) and the Central Machine Tools Institute with a grant of 920 crore, will work on key technologies that cannot be “bought” or “brought” by India. The government will also enlist industry as a partner in the project, aimed at reviving the 1.85 trillion Indian capital goods sector.

Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) have placed special emphasis on manufacturing, in which India lags vastly behind Asian economies like China, to boost economic growth that slumped to sub-5% levels in each of the past two financial years.

India has set for itself an ambitious target of increasing the contribution of manufacturing output to 25% of gross domestic product (GDP) by 2025, from 16% now.

As a result of the economic downturn, growth in the capital goods sector, which contributes 15.2% of India’s gross domestic product (GDP), has slowed in the past two years.

“On the basis of the results that come out of the pilot, we will take a prototype scheme, which will be a major one. We will identify critical areas, which need government push,” said a top government official on condition of anonymity. “Once that is decided, the total outlay for the prototype scheme can go up 10 times of the current amount.”

According to documents reviewed by Mint, the key technologies that have been identified include those pertaining to machine tools, earth moving, mining and construction equipment, plastic processing machines, heavy electrical apparatus, metallurgical and textile machines.

The ambitious plan may also see reworking of the syllabus according to industry needs at engineering institutes and short-term deputation of IIT professors to specific industries as advisers.

The institutes mentioned above would be asked to research and develop technology in one individual sector each. The plan is to look at high-end manufacturing, which is rare in India. This in turn will create jobs and will increase the contribution of manufacturing to GDP.

“Capital goods is a huge sector, which includes textile machinery, heavy electrical equipment among others. Its turnover is 1.85 trillion. But of late, growth has been negative in almost all sectors,” said the government official cited above.

He added: “The reason is there for everybody to see. While imports have increased very quickly, localization has not happened at all.”

The new government faces the task of reigniting investors’ interest in the capital goods sector, which has received a setback as companies struggled with high borrowing costs, delays in completing land acquisition and securing environmental clearances, and fuel shortages.

“Now, what we are doing is to solve the technological know-how problem, for which we are dependent on imports...why not reduce this imbroglio by developing those technologies which cannot be brought here or which are very expensive to be bought, for reasons such as patent laws etc. The idea is to develop them in-house in a very focused way,” said the government official.

The idea is to jointly develop skills of students and workers in specified technologies. In addition, there may be technology auditing by IITs of leading units for benchmarking with global best practices in energy, design, safety, materials, specifications, use of electronic and hydraulic controls that will open up areas for improvement.

The BJP’s election manifesto said, “We should no longer remain a market for the global industry. Rather, we should become a global manufacturing hub.”

“A strong manufacturing sector will not only bridge the demand-supply gap leading to price stabilization, but also create millions of jobs and increase incomes for the working class. Above all, it will increase the revenue for government and lead to import substitution to bring down the import bill. We will make India a hub for cost-competitive labour-intensive mass manufacturing,” the manifesto said.

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