Content:
- NITI Aayog launches Report on ‘Unlocking $25+ Billion Export Potential – India’s Hand & Power Tools Sector’
- Automotive Industry: Powering India’s Participation in Global Value Chains (GVCs)
NITI Aayog launches Report on ‘Unlocking $25+ Billion Export Potential – India’s Hand & Power Tools Sector’
Context : India’s hand and power tools sector holds immense untapped potential in the global market. NITI Aayog’s latest report charts a strategic roadmap to boost exports to $25+ billion by 2035, transforming India into a global manufacturing hub.
Relevance : GS 3(Indian Economy & Infrastructure)
Hand & Power Tools Sector
Hand tools are manually operated tools like hammers and screwdrivers used for basic tasks.
Power tools are electrically or mechanically powered tools like drills and grinders, used for faster, precision work.
Sector Overview and Global Context
- Global Market Size (Current): ~$100 billion (Hand tools: $34B; Power tools: $63B).
- Projected Global Market (2035): ~$190 billion (Hand tools: $60B; Power tools: $134B).
- Dominant Player: China – holds ~50% of hand tools and ~40% of power tools export market.
- India’s Current Share:
- Hand tools exports: ~$600 million (1.8% global share).
- Power tools exports: ~$470 million (0.7% global share).
India’s Target Vision (2035)
- Export Goal: $25+ billion over the next 10 years.
- Job Creation: ~35 lakh jobs.
- Market Share Aspirations:
- 25% in global hand tools market.
- 10% in global power tools market.
- National Strategy Goal: Elevate India as a high-quality, reliable global manufacturing hub, aligned with Make in India and Viksit Bharat @ 2047.
Key Challenges Identified
- Cost Disadvantage: India faces a 14-17% cost disadvantage vs. China.
- Reasons:
- High cost of key inputs: steel, plastic, electric motors.
- Labour productivity issues: capped overtime, higher costs.
- Elevated interest and inland logistics costs.
- Reasons:
- Low Scale & Fragmented Production: MSME-dominated sector lacks economies of scale.
- Regulatory Burdens:
- Restrictive Quality Control Orders (QCOs).
- Complicated import duties and EPCG (Export Promotion Capital Goods) norms.
- Complex AEO (Authorized Economic Operator) requirements.
- Inflexible labour laws and real estate/building regulations.
Three-Tiered Intervention Strategy Proposed
World-Class Hand Tool Clusters
- Infrastructure Investment:
- 3–4 clusters aggregating ~4,000 acres.
- Public-Private Partnership (PPP) mode with plug-and-play readiness.
- Facilities: worker housing, logistics connectivity, convention centers.
- Goal: Enable scale, reduce transaction costs, enhance productivity.
Market & Policy Reforms
- Input Cost Reduction:
- Rationalise import duties on raw materials (steel, plastic, motors).
- Ease of Business:
- Simplify EPCG and AEO procedures.
- Reduce harsh penalties like interest on defaults.
- Structural Reforms:
- Amend labour laws for flexible hours and productivity.
- Reform land/building regulations to promote industrial construction.
Bridge Cost Support (Conditional)
- Fiscal Requirement:
- If reforms delay: Rs. 8,000 crore support estimated.
- RoI Perspective:
- Considered an investment, expected to yield 2-3x in tax revenues in 5 years.
- Existing Support Schemes:
- RoDTEP, Duty Drawbacks sufficient if structural reforms succeed.
Strategic Importance of the Sector
- Enabler of Global Manufacturing: Tools are foundational to all manufacturing industries.
- Growth Drivers:
- Construction boom (domestic and global).
- Rise in DIY market trends globally.
- Synergy with National Missions:
- Supports Make in India, Skill India, and Viksit Bharat @ 2047.
- Strengthens MSMEs and industrial value chains.
Way Forward
- Innovation and R&D: Promote tech advancement in MSMEs.
- Skill Development: Upskill workforce for modern tool manufacturing.
- Brand India: Position Indian tools as synonymous with quality and reliability.
Automotive Industry: Powering India’s Participation in Global Value Chains (GVCs)
Context : India’s automotive industry, a pillar of its manufacturing sector, is rapidly evolving amid global shifts toward electric, digital, and sustainable mobility. A new NITI Aayog report charts a roadmap to boost India’s integration into Global Value Chains (GVCs) and position it as a global auto component powerhouse.
Relevance : GS 3(Indian Economy & Infrastructure)
Macroeconomic Importance
- Contributes 7.1% to India’s GDP and 49% to manufacturing GDP.
- Over 28 million vehicles produced in 2023–24, showing India’s scale advantage.
- Supports millions of jobs, including in steel, electronics, IT, logistics—demonstrates sectoral interdependence.
Global Value Chain (GVC) Snapshot
- India holds just 3% share (~$20 bn) in the $700 bn global auto component trade.
- Trade ratio ~0.99 shows a near balance of imports and exports—indicating domestic demand dominance, but low global integration.
- Weak presence in high-value segments like engines, transmission, and steering systems (only 2–4% global share).
Vision 2030 Targets
- Production target: $145 billion
- Exports: $60 billion
- Jobs: 2–2.5 million direct jobs
- GVC share goal: Raise from 3% → 8%
- Trade surplus goal: $25 billion
- Strategy: From low-cost assembly → high-value, innovation-driven manufacturing
Key Global Trends Reshaping the Sector
- Electric Vehicles (EVs): Global push via mandates/subsidies; opportunity in batteries, semiconductors.
- Smart Manufacturing (Industry 4.0): Adoption of AI, IoT, robotics, digital twins, 3D printing—areas where India must catch up.
- Sustainability: Shift toward carbon neutrality, recycling, energy efficiency—automakers like BMW, VW already transitioning.
- Component Dependency: Rising demand for precision electronics, semiconductors, smart sensors.
Major Government Interventions
- Make in India: Boosted auto manufacturing, FDI inflows.
- Atmanirbhar Bharat: Incentivized indigenous production of engines, EV batteries.
- FAME I & II (₹11,500 cr): Subsidies for 2W, 3W, buses, charging infra → EV ecosystem buildout.
- PM E-Drive (₹10,900 cr):
- Targets 24.79 lakh 2W, 3.2 lakh 3W, 14,028 buses.
- ₹2,000 cr for charging infra.
- PLI for Auto + ACC (₹44,038 cr): Incentivizes advanced tech like hydrogen vehicles, EVs, batteries, job creation, value addition.
Challenges to GVC Integration
- Cost disadvantage vs China (~10%):
- High raw material and capital costs
- Depreciation rate differential (100% in India vs 50% in China → adds 3.4% cost)
- High logistics, energy, financing costs
- R&D & Precision Gaps:
- Weak IP ownership
- Lack of high-end manufacturing in critical parts
- Cluster fragmentation: Lack of consolidated testing, R&D, and supplier networks.
Proposed Strategic Interventions
Fiscal Measures
- Opex Support: For Capex like dies, tools, infra.
- Skill Development: Build domain-specific talent pool.
- R&D Incentives & IP Transfers: Public-private R&D, promote MSME innovation.
- Cluster Development: Shared testing, design, logistics facilities.
Non-Fiscal Measures
- Digital Upgrade (Industry 4.0): Incentivize smart factories, digital tracking.
- International Collaboration: JVs, FTAs, co-development with global OEMs.
- Ease of Doing Business: Simplify compliance, promote MSME onboarding.
Way Forward: Tapping the GVC Potential
- Shift from volume to value: Compete in high-margin, tech-heavy auto components.
- Deepen export footprint: Develop global scale + branding + standards.
- Policy certainty & reform alignment: Critical for investor confidence and infra buildout.
- EV & Green Mobility: India can leapfrog legacy tech with EV-first approach.
