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With trade and current account deficits becoming worrisome, the Government has started on an exercise to reduce dependence on imports for capital goods. Work is apace on a policy to make the capital goods industry globally competitive.
The value of capital goods imports, including project goods, is set to cross $50 billion this fiscal, accounting for more than 10 per cent of the total imports. In sharp contrast, the domestic output of capital goods contracted by 10.1 per cent in the April-December period.
The Department of Heavy Industries and Public Enterprises will soon appoint consultants to profile and analyse the sector and offer policy recommendations for the sector valued at roughly Rs 5,00,000 crore.
Import dependence
“The consultants will be asked to examine various policy parameters that govern the sector’s growth and identify the shortcomings. This would include the industrial, fiscal and the foreign trade policies in the light of various regional trade agreements being signed by India,” an Industry Department official told Business Line .
Despite a diversified domestic industry that employs about 14 lakh people, India is heavily dependent on capital goods imports from a handful of countries such as China and South Korea, especially in textile and power sectors.
“It is a shame how the Chinese have been allowed to take over our power generation industry. Our textile industry, too, is heavily dependent on imports. Definitely the time has come for the Government to scale up the domestic sector,” a Delhi-based trade expert said.
Since there is not much the country can do to control petroleum and gold imports, the Government wants to explore all possibilities to reduce dependence on non-oil imports and increase their exports so as to check the widening trade and current account deficit gaps.
“If we give our domestic industry the right mixture of fiscal incentives, infrastructure and skilled personnel, there is no reason why it can’t compete with global players, be it in the country or outside,” the official said
Consultants’ task
According to industry body Ficci, it is important to have domestic capabilities across the value chain in capital goods. “We hope that the roadmap is finalised soon, preferably in the next four-five months,” Ficci Director Chetan Bijesure said.
The Department of Heavy Industries has set April 16 for opening of bids.
In its Request for Proposal (RfP) for consultants, the Department has specified that the consultants will be required to identify key measures relating to research and development, technology enhancement, skill augmentation, export promotion, local purchasing encouragement, besides trade and taxation needed to power up the capital goods sector.
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