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Capital Goods

With a total market size of US$ 92 billion and production valued at US$ 32 billion,Capital Goods sector toda, contributes to !2" of #ndias manufacturin% output&'n the e(port front, #ndias share in %lobal e(ports from the sector is currentl

ver lo), ran%in% bet)een *&!" + *&" across various sub+sectors& #n contrast, incountries like China, German, -apan, .orea this ran%e is bet)een /" + !"dependin% on the sub+sector&

0ccordin% to data from World 1ank value added manufacturin% is !/" of #ndiasG4& See 5eferences for further details&

Capital %oods can be divided into nine broad sub+sectors6 7achine tools, 4rocessplant machiner, 8eav electrical machiner, e(tile machiner, dies:dies,moulds and tools;< =arth 7ovin% e>uipment, 7etallur%ical machiner, plasticprocessin% machiner and en%ineered %oods&

#ndia has been movin% from a sta%e of e(portin% lo) value %oods to developin%countries to a sta%e of e(portin% hi%h value %oods to developed countries& *"of #ndias total en%ineerin% e(ports no) %o to US ? =urope&

#ndian en%ineerin% e(ports %re) at C0G5 of @!!" to US$ A&/ bn in B!3 fromUS$ 33&/ bn in B*D

Capital Goods sector reveals that its fortunes are ine(tricabl linked )ith that ofthe overall #ndian industr& 8i%h de%ree of correlation bet)een the performancesof the t)o sectors is further accentuated b hi%h elasticit of Capital Goodsindustr to chan%es in industr %ro)th

7achine ools6 7other sector of the industr E D** manufacturers E lar%el S7=s<

5evival )ill be tri%%ered b + i; Sustained recover in consumption demand

leadin% to increased capacit utilization and ii; investment push b public sectorleadin% to a virtuous ccle of cash Fo) %eneration in the sstem

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5evenues of %lobal industrial plaers su%%ests that the slu%%ishness hascontinued for @D >uarters no) E 7iddle east& Sharp depreciation of =U5 that hasimproved the competitiveness of =uropean plaers in the traditional markets ofS= 0sia and 0frica alon% )ith 5upee appreciation

7anufacturin% ##4 remains slu%%ish and is do)n *&D" in 3B!A :3mma;, )hilecapacit utilization :as monitored b 51#; has declined to /!" in 2B!A :frompeak levels of /9" in 2B!*;

Drivers

Make in India6 evelopment of industrial clusters, simpliHcation ofdocumentation processes and re%ulator re>uirement )ith focus on IimportsubstitutionJ as )ell as Iincreased e(portsJ

=(ample6 0uto+components are bein% sourced in #ndia from #ndian companieslike 0mtek 0uto, 7otherson Sumi and Borce 7otors& he automobile maKors like7ercedes 1enz and 17W assemble in #ndia )hile sourcin% some componentsfrom these #ndian auto+components manufacturers and save on import dut as)ell as e(pensive auto parts& his reduces the cost of lu(ur automobiles andmakes them more competitive in the market&

Digital India is set to massivel boost the electronics hard)are sector& Someprominent investments include

5eliance #ndustries )ill invest over 5s 2&A lakh crore, includin% in rollout of its)ireless broadband infrastructure and manufacturin% of mobile handsets

.7 1irla )ould invest $9 billion over the ne(t Hve ears in net)ork rollout andinfrastructure, and to)ards other di%ital proKects

1harti %roup )as committed to investin% 5s ! lakh crore over the ne(t Hve earsin buildin% di%ital infrastructure

LC panel fabrication unit b Sterlite for M*,*** crore

Other drivers

 he #ndian mandated that Central 4SUs, Central %overnmentministriesNdepartments must procure 2*" of products and services from 7icro ?Small =nterprises :7S=s; thus boostin% the small enterprise manufacturin% in#ndia&

0lso, harmonization of ta( structure in the form of GS )ill reduce bureaucracand ineOciencies&

 he ePect of M9" B# in defence can be %au%ed in form of -Qs bet)een #ndianand forei%n companies e&%& 7ahindra efence and 0irbus 8elicopters -Q& his )illboost defence manufacturin% in #ndia as M*" of defence bud%et is spent oncapital ac>uisitions

!**" B# in medical devices

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#nvestment in rail)a infrastructure is a ke priorit for the 5ail)as 7inistr& his )ill beneHt #ndian companies like e(maco, ita%arh Wa%ons and BeddersLlod

=lectrical machiner6 urin% the last D ears, e(ports have increased at a C0G5of !M&D" to touch US M&9 1illion in 2*!3+!M& he industr is )holl de+licensed)ith !**" B#& he %overnment has a planned capacit addition of DD&A GWproKected at the end of 2*!/ throu%h the 0ccelerated 4o)er evelopment5eform 4ro%ram&

4o)er 4lant =>uipment6 0s #ndia %ro)s in manufacturin% pro)ess anddevelopment, it needs to fulHl the %ro)in% po)er re>uirement in the countr&

 his )ill help po)er plant e>uipment manufacturers like L? 784S 1oilers 4vtLtd, a -Q bet)een L? and 7itsubishi 8itachi 4o)er Sstems )hich makesboilers, turbines and %enerators for po)er proKects

Weaknesses

1rid%in% the technolo%ical %ap

Concrete implementation of polic initiatives in land ac>uisition as )ell as ePortsunder)a to i; unlock minin% activit, ii; )iden the space for forei%n directinvestment in defence, insurance and rail)as, iii; e(peditin% proKect approvalsand iv; supportive monetar conditions

=(port performance has been hamstrun% b a multitude of factors, includin%6 i;)eak %lobal demand, ii; %eopolitical tensions and iii; sharp currenc volatilit inseveral markets

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5ecommendation6 0stra 7icro)ave :5ank ! in 1usiness odas Bastest+Gro)in%=mer%in% Companies se%ment )ith revenues of A**+!*** crore;

5eferences

http6NNdata&)orldbank&or%NindicatorNRQ&#R&70RB&S

7anufacturin% refers to industries belon%in% to #S#C divisions !A+3/& Qalue addedis the net output of a sector after addin% up all outputs and subtractin%intermediate inputs& #t is calculated )ithout makin% deductions for depreciationof fabricated assets or depletion and de%radation of natural resources& he ori%in

of value added is determined b the #nternational Standard #ndustrialClassiHcation :#S#C;, revision 3& Rote6 Bor Q01 countries, %ross value added atfactor cost is used as the denominator&

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