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Capital goods policy gets govt green signal

business Updated: May 26, 2016 06:02 IST

NEW DELHI: In what could give a fillip to the manufacturing sector, the government on Wednesday approved the firstever policy for the country’s capital goods sector.

The National Capital Goods Policy, which aims to create over 21 million jobs by 2025, envisages increasing the share of domestic production in India’s capital goods demand from 60% to 80% by 2025 and in the process improve domestic capacity utilisation to 90%.

The idea of a National Capital Goods Policy was first presented by the department of heavy industry (DHI) in December 2014. The policy was put on its website for comments on February 15, 2016.

“This is first-ever policy for capital goods sector with a clear objective of increasing production of capital goods from Rs 2.3 lakh crore in 2014-15 to Rs 7.5 lakh crore in 2025 and raising direct and indirect employment from the current 8.4 million to 30 million,” the government said in a statement.

The policy aims to increase direct domestic employment from the current 1.4 million to at least 5 million and indirect employment from the current 7 million to 25 million by 2025, thus providing additional employment to over 21 million people.

Capital Goods are crucial for the manufacturing industry as it forms the backbone of the industry. Exports are directly linked with the capital goods and the policy will give a boost to the falling exports.

The policy says that once in place it will increase exports from current 27% to 40% of production.

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

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.

“The aim of the policy is create game-changing strategies for the capital goods sector. Some of the key issues addressed include availability of finance, raw material, innovation and technology, productivity, quality and environment-friendly manufacturing practices, promoting exports and creating domestic demand,” the statement added.

The whole idea is to unlock the potential of this promising sector and establish India as a global manufacturing powerhouse, said the document unveiled earlier this year.

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 and uniform tax rate across all capital goods sub-sectors.