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Capital goods policy gets nod, aims to triple output 

Business Standard , May 26, 2016

The Cabinet on Wednesday approved a policy for the capital goods sector, aimed at increasing production to Rs 7.5 lakh crore by 2025.

Apart from tripling the sector's production from Rs 2.3 lakh crore now, the policy aims to increase direct and indirect employment from 8.4 million to at least 30 million by 2025.

The Department of Heavy Industry had earlier stated that capital goods production could boost the domestic economy. "The entire economy will get a fillip once manufacturing of capital goods increases, as downstream manufacturing will also rise," said Railways Minister Suresh Prabhu, who gave a press briefing after the Cabinet took the decision.

Capital goods act as inputs for the manufacture of other goods. Likewise, capital goods production, which forms 8.8 per cent of the Index of Industrial Production, is considered a proxy for industrial and investment demand. It contracted for the fifth straight month till March, this year.

The government also aims to increase the share of domestic production in India's capital goods demand to 80 per cent by 2025. Currently, at 60 per cent, the large scale influx of low-duty goods from foreign shores has been blamed. Improvement in domestic capacity utilisation to 80-90 per cent has also been targeted. "India has the potential to be the net exporter of capital goods as against the net importer currently", FICCI President Harshavardhan Neotia said, welcoming the policy. The erstwhile Planning Commission had targeted a growth rate of 16.8 per cent per annum for the sector during the XII five-year Plan period.