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Indigenous Design & Development to Seize India’s Capital Goods Opportunity
Nov 26, 2019

Demand generation, strengthening supplier base, investments, collaborations including industry-government-academia engagements and advanced skilling are combined to enhance the growth of the capital goods sector so far. Moving forward, an accelerated growth trajectory can be formed by taking the Make in India push to the next level and making value additions with design, technology ownership and addressing issues of technology development, said Dr A R Sihag, Secretary, Department of Heavy Industries. 

Dr Sihag was speaking at the 4th  CII-DHI Capital Goods Summit today on ‘Capital Goods sector driving $ 1 trillion manufacturing economy by 2025: Investment and R&D as key enablers for growth’.

Articulating the demand side and supply side interventions for capital goods, the Secretary said, government has been doing a lot through infrastructure development for demand generation. DHI ‘s contributions are critical to the supply ecosystem in encouraging investment, R&D, building investment efficiencies, reducing imports, developing technology, skill building, etc. Capital Goods being a deregulated sector with no regulatory hurdle, he encouraged industry to make investment into sector.

Adding further he said, as India's GDP is expected to reach US$ 5 trillion by FY25, key areas like heavy industries play a very prominent role in terms of the significant contribution of the sectors to the national economy. Capital Goods industry which has crossed the production value of US$ 70 billion in 2017 is expected to cross US$ 100 billion by 2025. It contributes around 2% to GDP and has a large multiplier effect on employment. Investment, technology and R&D will play the key enablers towards such growth target. “For technology development and enhancing competitiveness of the sector, the Capital Goods scheme can largely be scaled up”, said Dr Sihag.

With 0.6% global share, India’s export performance in the capital goods sector has also been modest in comparison to imports. Export must also account for 40% of engineering goods production from the current share of 27%. Highlighting the issue of competing supplier, he said, we should be net exporter for capital goods. He emphasised there should be level-playing field to compete with foreign suppliers in terms of logistics, cost of capital and infrastructure. To support industry, Government is ready to work towards a phased manufacturing programme including tweaking of duty structure with reasonable justifications, trade regulations and correcting inverted duty structure, etc.

To indigenise manufacturing capabilities in India, IIT Madras has launched the advanced manufacturing technology development centre which is working with industry on various aspects including the smart manufacturing platform for production processes. The centre brings the concept of industry-academia collaboration to offer solutions for developing advanced technology in the sector by inviting industrial partners. We must work on the next stage of the scheme now to scale up the investment targets, he said. We must replicate this in larger scale, identifying bigger problems with industry and work towards solving them. Going forward, the design component may be added with the Centre of Excellence (CoE) model.

He invited suggestions on what more DHI can do to handhold the MSME sector and promote the start-up ecosystem to keep the bottom up approach and encourage high entrepreneurship efforts for the supply chain.

Speaking at the occasion, Dr Nalin Shinghal, Chairman, CII National Committee on Capital Goods and Engineering and Chairman and Managing Director, BHEL said, CII is working closely with government in trebling the production and increase the sector’s contribution from 12% to 20% of total manufacturing in few years. Investment and R&D are the two key challenges for the sector. As next decade will be crucial for the sector to perform in the global arena, indigenising technology and manufacturing capabilities become the key.

Global competitiveness being an important aspect, taking advantage of industry 4.0 and accelerating R&D will help the sector bringing desired transformation, said Mr B Thiagarajan, Managing Director, Blue Star ltd.

Mr Ravi Raghavan, Co-Chairman, CII National Committee on Capital Goods and Engineering and CEO & MD, Bharat Fritz Werner Ltd. said, capital goods being the backbone of manufacturing, makes inputs for many other sectors, including the capital goods itself. If we need to achieve our economic growth target, the capital goods industry would need to grow at 17%, and industry 4.0 can add the desired impetus towards the growth target.

25 November 2019 
New Delhi

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