Government says scheme for capital goods sector on the anvil

Amidst India's widening trade and current account deficits, the government is formulating a scheme to encourage technological acquisition and R&D activities in the capital goods sector to help reduce dependence on imports of such goods.

The Department of Heavy Industry (DHI) is working on a policy for the capital goods industry during the 12th plan to make it globally competitive.

"To develop the sector, we are working on a capital goods scheme," DHI Secretary Sutanu Behuria told PTI on the sidelines of a Confederation of Indian Industry (CII) event in Delhi.

The major components of the scheme would be R&D, technological acquisition, common facility centres and technology upgradation fund scheme (TUFS), he added.

The DHI has circulated a Cabinet note to the concerned ministries in this regard.

Asked when the scheme would be in place, he said, "We have circulated the Cabinet note. It has to go to the Finance Ministry and then to the Cabinet for consideration."

The capital goods industry contributes about 12 per cent to the total manufacturing activity and provides machinery and equipment to the sectors covered under the manufacturing activity.

The industry feels it has still not got the requisite attention even though it employs 14 lakh people and has an important bearing on the growth of user industries.

Despite a huge domestic industry, India is dependent on imports of capital goods from a handful of countries such as China and South Korea, mainly in the textiles and power sectors.

The government wants to explore all possibilities to reduce dependence on non-oil imports and increase exports so as to check the widening trade and current account deficits.

During April-August, exports were up by 3.89 per cent at $124.42 billion, while imports also grew by 1.72 per cent to $197.79 billion, leaving a trade deficit of $73.36 billion.

The government proposes to bring down the country's high current account deficit to 3.8 per cent of GDP, or $70 billion, in the current fiscal year (FY14).