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Q. National Capital Goods Policy: Comment on recently approved India’s capital goods policy.
May 27, 2016 Related to : GS Paper - 3

Ans :

Introduction-

Recently Government of India has approved India’s first ever National Capital Goods Policy (NCGP) for a sector that produces durable and heavy goods which in turn form the mainstay of goods and services produced for end-user consumption. The policy aims to make country as a world-class manufacturing hub and it will play a pivotal role in overall manufacturing as the pillar of strength to the vision of Make in India.

Key features policy-

  • To increase domestic production of capital goods from Rs 2.3 lakh crore in 2014-15 to Rs 7.5 lakh crore by 2025.

  • To increase the share of capital goods in total manufacturing activity from 12% at present to 20%.

  • To raise direct and indirect employment from the current 8.4 million to 30 million by 2025.

  • It envisages to raise exports up from the current 27% to 40%

  • It aims increase the share of domestic production in India's demand from current 60% to 80% in 2025.

Analysis-

  • The capital goods sector as the cog in the value added manufacturing wheel, these goods act as inputs for the manufacture of other goods. If we increase the production of capital goods, then by multiplier effect, it will increase the production of secondary goods leads to an overall economic growth.

  • India's manufacturing sector contributes about 2% of the world's GDP and 17% own economy. And presently India is net importer of capital goods. To sustain in coming decades India need to expand the share of manufacturing in GDP.

  • Capital goods policy aims to provide an enabling environment for the industry which will include a long-term and stable duty structure that will encourage domestic manufacturing.

  • It will create a sustainable economic growth and enables to employ millions of youth entering its labour market every year. 

Suggestions-

  • Indian industries are suffering from lack of research and development, which are prerequisite for constant innovation and up-gradation of capital goods.

  • In the globalised era, to become competitive, Indian industries need new methods of production, new materials, better knowledge ecosystem etc. 

  • Hence national capital goods policy should also consider the research and development aspect to make Indian manufacturing more competitive.

Conclusion-

Considering the India’s current status of manufacturing sector and future demand of economy, an energetic and robust national capital goods policy is the need of the hour. The new policy will provide the much needed impetus to the sector and will go a long way in achieving the objectives of Make in India. To realise the objective of capital goods policy India also needs to develop a knowledge ecosystem that includes a good intellectual property regime to foster innovation and creativity.


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