CAPITAL GOODS

FDI In Capital Goods Sectors

The capital goods manufacturing sector facilitates engagement across sectors such as construction, engineering, infrastructure, consumer goods etc. Increasing demand has led to notable growth in the capital goods sector of India. The capital goods industry in FY 2018 -19 had an overall production figure amounting to $13.6 bn. Capital Goods industry in India provides approximately 5 mn direct employment.

Market-oriented reforms such as "Power for All" along with plans to add 93 GW by 2022 will generate huge demand for power transmission and distribution (T&D) equipment. India became a permanent member of the Washington Accord (WA) in June 2014. The country is now a part of an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers.

100% FDI in capital goods sector is allowed under the automatic route.

1

Direct and indirect employment expected to reach 5 million and 25 million, respectively by 2025
2

Indian generation and T&D equipment market to reach $100 bn by 2022
3

Indian Electrical equipment is the largest sun-sector followed by Plant equipment & Earth moving/mining machinery

The Capital Goods in India has a market size of $43.2 bn. India is an attractive destination for FDI in capital goods sector.

The industry is divided into 10 sub-sectors where Electrical equipment is the largest sub-sector followed by Plant equipment, and Earthmoving/ Mining machinery

The market size of each of the sub-sectors are as follows:

Ageing equipment requires auto replacement
Opportunity for Transmission & Distribution (T&D) sector
Huge market potential
Target industry size of $ 100 bn by 2022
The potential for closing import-export gap
The Capital Goods imports to India is approximately 3X the exports
Massive power capacity addition in future
Infrastructure, Power, Mining, Oil & Gas, Steel & Automotive
Nuclear capacity expansion
Significant business opportunity

Dec 2018: SANY India, the Indian arm of Beijing-headquartered construction equipment maker SANY Group, is planning to invest Rs.1,000 crore (USD $142.49 mn) to expand its construction machinery production capacity to 25,000 units.
May 2018: Schneider Electric and Temasek acquired Larsen & Toubro’s (L&T) electrical and automation business in May 2018.
Feb 2018: In the Union Budget 2018-19, the government allocated USD $92.22 bn for the infrastructure sector.
Nov 2017: The Central government plans to spend $459.7 mn to implement various programs under the National Capital Goods Policy.
Jan 2017: The Union Cabinet has approved incentives up to Rs.10,000 crore (USD $1.47 billion) for investors by amending the M-SIPS scheme, in order to further incentivise investments in electronics sector, create employment opportunities and reduce dependence on imports by 2020.

$5.6 bn FDI in capital goods sector inflows in Industrial Machinery during April 2000 – March 2019
$8 bn FDI inflows in Electrical Equipment during April 2000 – March 2019
100% FDI is allowed under the automatic route in the electrical machinery sector