There may be big announcements regarding local manufacturing in the budget.Image Credit source: ChatGPT
The Indian government has made a master plan to reduce dependence on imports and leave China behind in the manufacturing sector. Which can be announced in the budget. According to sources familiar with the matter, the Government of India may announce incentives of up to Rs 23,000 crore in the upcoming budget, the purpose of which is to promote local production of expensive captain goods or heavy machinery and reduce dependence on imports. A senior official said in the ET report that plans are being prepared and can be announced in the budget.
Which sector will get how much money?
The official said an incentive program of Rs 14,000-16,000 crore for construction equipment is being finalized, while work is also underway on a Rs 7,000 crore scheme to establish a strong global value chain (GVC) for the automobile sector. The proposed measures are aimed at furthering the government’s efforts to strengthen the capital goods sector. In January 2022, the Ministry of Heavy Industries launched the second phase of the Scheme to Enhance Competitiveness in the Indian Capital Goods Sector, in which Rs 1,207 crore was allocated to support shared technology and testing infra.
Heavy machinery manufacturing
The Central Government has extended customs duty exemption to 35 additional capital goods for electric vehicle battery manufacturing and 28 additional capital goods for mobile phone battery production as part of efforts to promote local lithium-ion battery manufacturing in the Union Budget 2025-26. The official said that the aim of the construction equipment package is to indigenize high level machinery like tunnel boring machines and cranes, so that dependence on imports can be reduced. Nearly half of the sector’s components by value are currently imported from countries including China, Japan, South Korea and Germany.
When China imposed ban
The restrictions imposed by China on the export of tunnel boring machines had affected major infra projects in India. Beijing lifted the sanctions last year after high-level diplomatic talks with New Delhi. Major components imported in this sector include high-tech components such as hydraulics, undercarriage and electronic control units (ECU), sensors and telematics. The official said the scheme will reduce imports of heavy and fully manufactured machines and also added that the new program will seek to build on the benefits derived from existing incentive measures.
360 degree cameras and sensors will be manufactured locally
The main objective of the GVC scheme is to focus on local manufacturing of modern car equipment such as advanced driver assistance systems, 360 degree cameras and sensors. Local manufacturing will be supported with 50 per cent domestic value addition of these specialized automotive parts, the official said, adding that this could also open up export opportunities. Subsidy on the purchase of capital goods like molds and power tools used in the manufacturing of auto parts will also be part of this new scheme. Under this scheme, establishment of prototyping centers will also be supported.