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Annual Report 2007-08
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:: PRESS RELEASES |
Players In Capital Goods Industry Need To Transform Into Service Oriented Organisations: Exim Bank Study
Players in the Indian capital goods industry needs to increasingly reorient their approach and transform themselves into service-oriented organisations, says an Exim Bank study. The study emphasised further that sale of capital goods is not a one-time transaction; it should be associated with technical support in transportation, erection, training, continuous service maintenance and periodical upgradation of technology.
Analysing the performance trends, the study pointed out that since 2002-03, the capital goods industry has been witnessing buoyancy in production. Though the growth momentum has marginally slowed down in 2007-08, the capital goods industry still continues to be a driver of growth in India's Industrial production. Cumulative foreign direct investments in the capital goods industry during the period January 2000 to December 2007 amounted to US $ 1.6 billion.
Globally, the market size of capital goods industry is worth US $ 4.5 trillion. Traditionally, Japan, USA and Germany are large suppliers of capital goods. Of late, Asian countries such as China, Taiwan and South Korea have become major players in production and export of capital goods. Consumption of capital goods has also increased substantially in developing Asian countries due to thrust given to the value added manufacturing.
Analyses of India's trade in select capital goods products reveal that in most of the products India is a net importer, indicating the need for capacity expansion, including technology upgradation, to cater to the rising demand, both from domestic and export markets. India's export destinations of capital goods is a mixed bag with both developed and developing countries. However, India's share in these markets is insignificant indicating ample scope for expansion of market share. In this regard, the study suggests the effective use of Exim Bank's Lines of Credit (LoC) mechanism for market expansion in the existing markets and penetration in new markets.
It is being viewed that economies of scale would position India further as a cost-effective manufacturing base for capital goods. Strategies such as transformation of the shop-floors to be flexible to produce different types of machinery, redesigning the machining process to accommodate usage of common components / parts in various types of machinery, and leveraging of India's IT strengths in developing new generation machines, would contribute to the scale economies significantly. In addition, the study emphasizes the need for encouraging technology sourcing from countries such as Germany, Switzerland, Italy and Spain, especially in the context of shift in manufacturing base from developed to developing countries. Indian players should also effectively adapt the strengths of machining technologies in other developing countries such as China and Taiwan.
Changing trends in product quality and safety standards should be monitored and addressed, to sustain market presence in developed countries. Also, developing countries of Asia, Africa, Latin America and central and east Europe should be targeted for market expansion with effective supply chain management, thereby optimizing the product delivery schedules. With such strategies, Indian capital goods industry would be well positioned to compete internationally.
For further information, please contact
Mr.S. Prahalathan,
General Manager,
Export-Import Bank of India,
Centre One Building, Floor 21,
World Trade Centre Complex, Cuffe Parade,
Mumbai 400 005.
Telephone: 2217 2301,
Fax::(022) 22180743.
E-mail:prahalathan@eximbankindia.in
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