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With a total market size of US$ 92 billion and production valued at US$ 32 billion,
Capital Goods sector today, contributes to 12% of India's manufacturing output.
On the export front, India's share in global exports from the sector is currently
very low, ranging between 0.1% - 0.6% across various sub-sectors. In contrast, in
countries like China, Germany, Japan, Korea this range is between 7% - 16%
depending on the sub-sector.
According to data from World Bank value added manufacturing is 17% of Indias
GDP. See References for further details.
Capital goods can be divided into nine broad sub-sectors: Machine tools, Process
plant machinery, Heavy electrical machinery, Textile machinery, dies(dies,
moulds and tools); Earth Moving equipment, Metallurgical machinery, plastic
processing machinery and engineered goods.
India has been moving from a stage of exporting low value goods to developing
countries to a stage of exporting high value goods to developed countries. 60%
of Indias total engineering exports now go to US & Europe.
Indian engineering exports grew at CAGR of ~11% to US$ 56.7 bn in FY13 from
US$ 33.7 bn in FY08
Capital Goods sector reveals that its fortunes are inextricably linked with that of
the overall Indian industry. High degree of correlation between the performances
of the two sectors is further accentuated by high elasticity of Capital Goods
industry to changes in industry growth
Machine Tools: Mother sector of the industry 800 manufacturers largely SMEs;
Drivers
Make in India: Development of industrial clusters, simplification of
documentation processes and regulatory requirement with focus on import
substitution as well as increased exports
Example: Auto-components are being sourced in India from Indian companies
like Amtek Auto, Motherson Sumi and Force Motors. The automobile majors like
Mercedes Benz and BMW assemble in India while sourcing some components
from these Indian auto-components manufacturers and save on import duty as
well as expensive auto parts. This reduces the cost of luxury automobiles and
makes them more competitive in the market.
Digital India is set to massively boost the electronics hardware sector. Some
prominent investments include
Reliance Industries will invest over Rs 2.5 lakh crore, including in rollout of its
wireless broadband infrastructure and manufacturing of mobile handsets
KM Birla would invest $9 billion over the next five years in network rollout and
infrastructure, and towards other digital projects
Bharti group was committed to investing Rs 1 lakh crore over the next five years
in building digital infrastructure
LCD panel fabrication unit by Sterlite for 40,000 crore
Other drivers
The Indian mandated that Central PSUs, Central government
ministries/departments must procure 20% of products and services from Micro &
Small Enterprises (MSEs) thus boosting the small enterprise manufacturing in
India.
Also, harmonization of tax structure in the form of GST will reduce bureaucracy
and inefficiencies.
The effect of 49% FDI in defence can be gauged in form of JVs between Indian
and foreign companies e.g. Mahindra Defence and Airbus Helicopters JV. This will
boost defence manufacturing in India as 40% of defence budget is spent on
capital acquisitions
100% FDI in medical devices
References
http://data.worldbank.org/indicator/NV.IND.MANF.ZS
Manufacturing refers to industries belonging to ISIC divisions 15-37. Value added
is the net output of a sector after adding up all outputs and subtracting
intermediate inputs. It is calculated without making deductions for depreciation
of fabricated assets or depletion and degradation of natural resources. The origin
of value added is determined by the International Standard Industrial
Classification (ISIC), revision 3. Note: For VAB countries, gross value added at
factor cost is used as the denominator.
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http://businesstoday.intoday.in/story/emerging-companies-2015-astramicrowave-b-malla-reddy-plans-ahead/1/221084.html
http://economictimes.indiatimes.com/news/defence/push-for-make-in-indiaairbus-mahindra-to-jointly-manufacture-militaryhelicopters/articleshow/47923573.cms
http://timesofindia.indiatimes.com/india/Hike-in-defence-FDI-cap-fails-to-lureinvestors/articleshow/46522466.cms
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