Budget May Roll Out ₹23,000 Crore Incentives to Boost Local Capital Goods Manufacturing
The upcoming budget is set to introduce significant measures aimed at fortifying India’s capital goods sector. India may roll out incentive packages totaling ₹23,000 crore to stimulate local manufacturing of high-value capital goods and reduce dependence on imports, according to sources close to the discussions.
Proposed Incentives for Capital Goods Manufacturing
– The budget may feature approximately ₹14,000-16,000 crore for a nearly finalized incentive program specifically for construction equipment.
– A separate ₹7,000 crore initiative is anticipated to focus on establishing resilient global value chains (GVC) within the automobile sector.
These schemes are designed to enhance the government’s ongoing efforts to revitalize the capital goods sector.
Recent Developments in Capital Goods
– In January 2022, the Ministry of Heavy Industries launched the second phase of the Scheme for Enhancement of Competitiveness in the Indian Capital Goods Sector, allocating ₹1,207 crore to improve shared technology and testing infrastructure.
– In the 2025-26 Union Budget, customs duty exemptions were expanded to include 35 additional capital goods for electric vehicle battery manufacturing and 28 for mobile phone battery production to bolster local lithium-ion battery manufacturing.
Focus on Construction Equipment
The construction equipment initiative aims to localize high-end machinery production, specifically targeting products such as tunnel boring machines and cranes to minimize import dependence. The official stated:
– Currently, nearly 50% of sector components by value are sourced from countries such as China, Japan, South Korea, and Germany.
– Restrictions on tunnel boring machine exports from China have previously affected key infrastructure projects; however, these restrictions were lifted after diplomatic negotiations last year.
Import Components of Importance
Key imported components in the capital goods segment include:
– Hydraulics
– Undercarriages
– High-tech components like electronic control units (ECUs), sensors, and telematics
The new schemes are poised to support the reduction of imports of high-tonnage, fully assembled machinery and further advance the ongoing incentive measures.
Automotive Sector and GVC Initiatives
The GVC scheme aims to enhance localized manufacturing of advanced automotive parts, such as:
– Advanced Driver Assistance Systems (ADAS)
– 360-degree cameras
– Sensors
By encouraging local manufacturing with 50% domestic value addition in these niche automotive components, the initiative could also uncover new export opportunities.
Additional Support and Subsidies
Future incentives may include:
– Subsidies for purchasing capital goods like molds and power tools essential in auto parts manufacturing.
– Establishment of prototyping centers to facilitate pre-production testing, ensuring supply chain resilience via industry partnerships.
In conclusion, the proposed ₹23,000 crore incentive packages align with India’s commitment to boosting local capital goods manufacturing. This strategic approach not only aims to reduce import reliance but also seeks to foster innovation and bolster economic growth in the capital goods sector.