New Delhi: The Union cabinet on Wednesday approved a policy to encourage domestic production of capital goods to support the government’s attempt to boost local manufacturing under the “Make in India" campaign.

The meeting also approved 10,736 crore worth of investments by the railways to expand its network, rail minister Suresh Prabhu told reporters after the cabinet meeting.

“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%, its capital goods manufacturing base too had gone up. Local production of construction cranes and other equipment in China helped its manufacturing industry. If we also make the capital goods required by the manufacturing sector, the entire economy will get a fillip," said Prabhu.

The new policy proposes measures to improve availability of finance and raw material, and promote innovation, productivity, quality and environment-friendly manufacturing practices. It also suggests ways to promote exports and create domestic demand.

An official statement issued after the cabinet meeting said the National Capital Goods Policy seeks to raise production of capital goods from 2.3 trillion in 2014-15 to 7.5 trillion in 2025. It also aims to raise direct and indirect employment in the sector from the current 8.4 million to 30 million.

The policy envisages increasing exports from the current 27% to 40% of production. It also aims to increase the share of domestic production that fulfils local demand from 60% to 80%, making India a net exporter of capital goods.

The policy will facilitate the use of technology across sub-sectors, increase skill availability, ensure mandatory standards, and promote growth and capacity-building in micro, small and medium enterprises. The heavy industry department will implement the policy provisions.

The cabinet committee on economic affairs approved five railway projects of network expansion at a cost of 10,736 crore. The projects will benefit Gujarat and Uttar Pradesh and ease the existing demand on freight and passenger traffic, Prabhu said at a briefing on cabinet decisions.

The cabinet also gave retroactive approval to set up six new Indian Institutes of Technology (IITs)—at Tirupati in Andhra Pradesh, Palakkad in Kerala, Dharwar in Karnataka, Bhilai in Chhattisgarh, Goa and Jammu, and for conversion of the Indian School of Mines, Dhanbad, to an IIT.

The government also cleared the financial restructuring of Hindustan Steelworks Construction Ltd and its takeover by National Buildings Construction Corp. Ltd (NBCC), a central government enterprise.

As both companies are engaged in similar businesses, the decision will provide economies of scale for NBCC and help in better manpower utilization, said the official statement.

The cabinet also approved the financial restructuring of Hindustan Fertilizer Corp. Ltd (HFCL). This includes a loan waiver of 1,916 crore from the government of India and an outstanding interest of 7,163 crore on the loan.

The restructuring will clear the way for faster revival of the Barauni unit of HFCL and will help meet the growing demand for urea from Bihar, West Bengal and Jharkhand, said the official statement.

The cabinet also approved the introduction of two bills in Parliament for amendments in the Constitution (Scheduled Tribes) Order, 1950, to modify the list of scheduled tribes in five states and the Union territory of Puducherry. These are Assam, Chhattisgarh, Jharkhand, Tamil Nadu and Tripura, and Puducherry.

According to an official statement, the inclusion of tribal communities including Bodos in Assam and Bhuyans in Chhattisgarh will allow them to avail benefits of reservation in services and admission to educational institutions.