The ‘Make in India’ campaign of Prime Minister Narendra Modi has enthused the entire manufacturing sector. Focus on ease of doing business, implementation of GST and other reforms augur well for the manufacturing industry. The campaign designed to facilitate investments, foster innovation, enhance skill development, protect intellectual property and build best in class manufacturing infrastructure within the country, has brought in a fresh round of excitement in the manufacturing industry in the country. Several of the OEMs – Maruti Suzuki, Hyundai, HMSI, Hero and several others have announced fresh investments or expansion plans. This will lead to further deepening of the automotive supply chain in India. Indian Automotive industry is one of the largest in the world. Most major OEMs are present and manufacture in India; the Indian Auto Component industry has become an attractive supplier base for global markets. India has also emerged as a leading global hub for small cars with around 31% of the global small cars sold, being manufactured in India. The sector’s impact on the Indian economy currently is significant as it contributes ~7% to the country’s GDP and is expected to increase to 12% as per the Automotive Mission Plan. According to the Automotive Mission Plan 2016-26 (AMP 2026); a collective vision of the Government of India and the Indian Automotive Industry, the Indian Auto Industry will be in the global top three for engineering, manufacturing and export of vehicles, auto components; it will encompass safe, efficient and environment friendly conditions for affordable mobility by 2026. The industry is likely to grow from USD 80 Billion to USD 270 Billion by 2016 and generate an additional 65 Million jobs. The Automotive industry is key to the domestic Manufacturing Sector contributing over 40% and impacting the fortunes of several related manufacturing industries such as Iron and Steel, Aluminum, Rubber, Chemicals, Molds etc. The Auto industry, over the years, has adapted well to the changes in the policy & regulatory environment and the needs of its customers. In FY 14-15 the Indian auto-components industry bounced back growing at 11% and registered a turnover of USD 38.5 billion. The exports clocked USD 11.2 billion growing at a CAGR of 29 percent over the period of six years. Today, the industry contributes 25.6% to the Manufacturing GDP and 3.8% to National GDP, providing direct employment to 1.5 million people and is an important driver of growth for the Indian economy. Automobile exports too have grown despite the global slowdown, growing at 14.89% from April-March 2015 over the same period last year. Component Industry is set to achieve USD 200 billion in turnover from the existing USD 38.5 billion by 2026, with exports ranging between USD 80 -100 billion from current USD 11.2 billion. These targets may seem a bit ambitious; however, considering the prowess of the industry, they are indeed achievable. To realize these goals, the industry needs to focus on internal efficiencies, ensure skill development of the existing talent pool, upgrade the capabilities of tier 2s and tier 3s, and strengthen India’s competitiveness as an investment destination for manufacturing by improving ease of doing business. The auto component industry is largely dominated by SMEs. Some of the key challenges being faced by the SMEs in the auto component sector are akin to those of the large enterprises (eg. infra deficit complex regulations, etc.) but considering the relative smaller size of the sector, the issues become more pronounced and acute: whether it be access to capital, access to technology or attracting and retaining the right talent – ingredients that are essential for global competitiveness. That apart, evolving our technology for meeting the evolving emission and safety standards, building auto-electronics manufacturing capabilities and embracing digital technology in manufacturing to transform productivity will be critical to scale the industry to next levels. To make ‘Make in India’ campaign a true success, the auto industry also needs to channelize its energies and investments on R&D and new product development. We need to leverage our strengths in frugal engineering to bring about products that are significantly cheaper and better in quality than the existing ones. The industry also needs to make a conscious effort to move away from ‘Build to Print’ to creation of IP. There is an urgent need to create an ecosystem that allows for innovation and R&D to proliferate. The industry has recommended to the Government to create a dedicated fund to boost R&D in the component sector. As we go forward, we wish to see a more collaborative approach between the various elements of the value chain – the component manufacturers, OEMs, machine tool suppliers, and the raw material industry. If we have to grow from being locally competitive to be globally competitive, our relationship must graduate from being transactional to a mutually beneficial and symbiotic one. I am confident that the Auto and Auto Components Industry will help develop India into a globally competitive manufacturing nation, delivering quality products, made in India for the World.

A robust manufacturing sector is an essential element of the Indian growth story, particularly important in ensuring employment for a large and growing age population. The “Make in India” program has been designed to facilitate investment, innovation, skill, protect intellectual property and build best-in-class manufacturing infrastructure.

The Capital Goods sector is of strategic importance for enabling robust manufacturing growth. With strong base for its engagement across sectors such as engineering, construction, infrastructure and consumer goods, the sector is to play a critical role in bringing the required competitiveness to the entire manufacturing sector and supporting in realizing “Make in India”.

The sector provides direct employment to ~1.4 million people, and indirect employment to ~7 million people, the Capital Goods industry is also one of the key contributors to value added manufacturing and is significant for overall economic development of India.

To boost to this very critical segment for achieving the vision of 'Make in India' the Department of Heavy Industry has proposed a comprehensive policy agenda. The draft policy envisions to provide for an enabling ecosystem for globally competitive capital goods sector and elevate Capital Goods' (CG) share in the total manufacturing from the present 12 percent to 20 percent by 2025 by ensuring sustained incentive for domestic manufacturers to service domestic as well as export market demand. For making India a manufacturing hub for critical inputs that is, machinery and equipment the policy has taken this opportunity to catalyze collaborative approach on various fronts to ensure opportunities across the value chain get adequately captured. Once ratified it would be the 1stever National Policy on Capital Goods.

To achieve higher growth, enabling eco-system, creation and expansion of market, promotion of exports, development of human resources, enhancement of technology & IPR, standards, focus on SMEs and building necessary support services have been outlined as the key strategic pillars for the Indian capital goods sector.

To build competitiveness in the sector the policy pitches for devising a long-term, stable and rationalized tax and duty structure. Proposals of uniform customs duty on imports of all capital goods related products, allowing up to 50 percent cenvat credit to manufacturers using such products as raw material or intermediates for further processing or using such goods in the manufacturing of finished goods would support in creating a favorable operating ecosystem for Indian CG manufacturers, while at the same time ensure cost competitiveness. With a view to ensure level playing field, the policy proposes adoption of uniform Goods and Services Tax regime, ensuring effective GST rate across all capital goods sub-sectors competitive with import duty after set-off. A transparent and participative mechanism under the Tariff Commission with representation from the Department of Revenue, DHI and industry associations has also been proposed to consistently review and ensure a rationalized duty structure with no inverted duty instances.

Presently, production of capital goods sector has not grown fast enough to match the pace of domestic demand leading to a growing dependence of imports. Envisaging on increasing exports to 40% of production while increasing share of domestic production in India's demand to 80% by 2025, policy focusses on actively promoting exports to tap opportunities in line with India's evolving trade map as well as developing the Indian CG manufacturing brand in global markets. For improved access to focus export markets it is proposed to constitute sub-sector specific committees to assess non-tariff barriers and consider them for removal. A Rs. 1,500 Cr pilot scheme is proposed for market development assistance. All capital goods sub-sectors are recommended to be integrated as priority sectors under 'Make in India' and development of a comprehensive branding plan for the sector with the support of India Brand Equity Foundation (IBEF) is proposed.

To expand and nurture domestic demand creation for Indian CG manufacturers the policy endeavors to facilitate a policy-driven ecosystem with coordinating support from end user ministries. An inter-ministerial committee with user industries and PSUs has been proposed to deliberate and review the public procurement guidelines to address the needs of the sector, such as simplification of procurement contract conditions and amendment of qualification criteria, and the issue of second-hand imports, which have been limiting the domestic demand.

Increasing the proportion of value addition would require greater innovation within the country. To bridge the technology gaps prevailing in the sector, the policy has focused on facilitating improvement in technology depth across sub-sectors, increase skill availability, ensure standards and promote growth and capacity building of SMEs. To increase the technology depth to elevate India's manufacturing competitiveness the draft calls for Technology Upgradation Fund Support (TUFS) for all capital goods sub-sectors and creating a Technology Development Fund for Rs. 1,000 Cr under PPP model. The upgradation of development, testing and certification infrastructure and set up of 10 more CMTI like institutes is also proposed. To strengthen existing capital goods scheme the policy recommends on increasing the scope of the present 'Scheme on Enhancement of Competitiveness of Capital Goods' by adding a set of components including technology, standards, skills, industrial parks and cluster development among others and increasing budgetary allocation to the scheme proportionally.

Focused efforts are required for increasing the pool of skilled manpower in India. To ensure skill availability the policy envisions to enhance the availability of the skilled manpower in the capital goods sector by training 50 lakh people by 2025. To achieve this, it recommends on creation of relevant institutions to deliver human resource and proposes to build capacity of existing training facilities in both public and private domain through PPP model and adequate funding anchored around the sector Skills council, setting up of 5 regional state of the art green-field Centers of Excellence and aligning existing Indian Technology Institutes (ITIs) through the hub and spoke model while increasing proximity to industrial clusters.

At the same time to curb inflow of sub–standard capital goods the policy endeavors to improve Indian standard development organizations (SDOs) and mandate technical and safety standards which conform to international standards and ensuring compliance to the same.

On availability of industrial financing, the draft pitches for subvention fund 'Start-up Center for Capital Goods Sector' with a funding of Rs. 25 Cr for setting up capital goods units and allow External Commercial Borrowings under automatic route for all capital goods. It also pitches for set up at least 5 Incubation Centers across the country in PPP mode and stresses on a continuous promotion of SMEs with the aim of supporting their evolution to local champions.

Last but not the least to translate policy intent in to policy driven action culminating in desired results draft also recommends to ensure establishment of governance mechanisms at appropriate levels.

The above measures inspire a lot of hope and the policy once approved will provide a new platform for Indian players to take advantage of the large Indian demand in sector and catapult for larger role in global markets.

I am delighted by the progress of the DHI-CII Joint Task Force on Capital Goods & Engineering, which has completed the drafting of the National Capital Goods Policy after extensive consultation across stakeholders from various sub-segments. The document well captures the key themes and concerns of the industry including Demand Creation, Promotion of Exports, Technology and IPR, Introduction of Mandatory Standards, and Focus on SME Development.

It is expected that the policy will be launched during the Make In India Week to be held during 13-18 Feb, 2016 at Mumbai. Needless to say, CII will only add speed and vigour to its efforts for the promotion of the sector. Through the CII National Committee on Capital Goods, we will lend all the possible support to the Government for implementing the recommendations made in the policy.