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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 a notable growth in the capital goods sector of India. The industry contributed approximately $10.4 bn to exports in 2016-17. Capital Goods industry in India provides approximately 1.4 mn direct and 7 mn indirect jobs.

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
  1. 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.
  2. May 2018: Schneider Electric and Temasek acquired Larsen & Toubro’s (L&T) electrical and automation business in May 2018.
  3. Feb 2018: In the Union Budget 2018-19, the government allocated USD $92.22 bn for the infrastructure sector.
  4. Nov 2017: The Central government plans to spend $459.7 mn to implement various programs under the National Capital Goods Policy.
  5. 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.

  • $5.2 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

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