As India aims to become a $1 trillion manufacturing economy by the end of this decade, one sector is crucial to that vision: capital goods. Often called the “mother industry,” capital goods not only support downstream manufacturing but also shape the nation’s technological ability, productivity, and industrial independence. Despite strong policy motivation and substantial investment interest, the capital goods sector faces ongoing challenges that require focused solutions if India’s broader manufacturing goals are to succeed. The Strategic Role of Capital Goods The Department for Promotion of Industry and Internal Trade (DPIIT) values the Indian capital goods market at around $43 billion, with nearly 40 per cent still dependent on imports. Closing this gap is vital for India to become a global manufacturing leader. What’s Driving Growth PLI Schemes and National Capital Goods Policy: These initiatives have encouraged domestic production, particularly in vital areas like heavy electricals, industrial automation, and robotics. Increased Infrastructure Spending: Government investments in roads, railways, and renewable energy are driving demand for various capital equipment. Defence Indigenisation and Space Commercialisation: These new areas are boosting the need for precision tooling, CNC systems, and advanced fabrication machinery. Digital Manufacturing and Industry 4.0: The rise of smart factories, IoT-enabled machines, and predictive maintenance tools is moving the sector toward higher-value production. India’s machine tools and process equipment manufacturers have also improved exports, especially to Southeast Asia, Africa, and the Middle East. However, advancing from fabrication to innovation is still a work in progress. The Gaps That Must Be Addressed High-tech component import dependency: Precision components, controllers, and high-end mechatronics remain largely imported. Low R&D spending: India invests less than 1 per cent of its GDP in R&D, and the capital goods sector’s share is even smaller. Local design capabilities are limited to a few companies. Fragmentation: A significant part of the industry is made up of MSMEs with little access to technology upgrades, certifications, and global markets. Skill and talent mismatch: Mechatronics, control systems, and advanced robotics require workers with diverse knowledge that is currently scarce. Way Forward: Enabling Scale, Technology, and Trust Technology co-development between Indian firms and global OEMs. Strengthening the component ecosystem through clustering, vendor development, and import substitution. Improving export competitiveness via branding, quality standards, and logistics support. Public-private R&D efforts focused on core machinery, automation, and precision engineering. India has a unique chance to leap into a leadership role, not by copying old industrial models, but by creating a flexible, tech-enabled capital goods sector that is resilient, scalable, and ready for the future. The goal is not just to manufacture more; it is to manufacture smarter, faster, and more competitively than ever before. The capital goods sector will play a key role in making this ambition a reality.
Capital goods, including machine tools, industrial machinery, process plant equipment, and automation systems, are key to industries like infrastructure, energy, automotive, defence, and electronics. Without a strong domestic capital goods sector, India will rely on imported machinery, weakening both its economic strength and strategic independence.
Several policy actions have started to make a difference:
While progress is being made, India’s capital goods sector faces several ongoing challenges:
For India to reach its $1 trillion manufacturing goal, the capital goods sector must shift from building capacity to leading in capability. Key priorities include:
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