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NITI Aayog Report on Hand and Power Tools Sector: Powering India’s Employment and Export Goals
NITI Aayog report pitches for incentive scheme for hand & power tools
Context: A recent NITI Aayog Report has pitched for an incentives scheme for the untapped hand and power tool Industry.
Vision and Targets: Doubling Down on Global Market Share
About the Hand and Power Tools Sector
- India currently holds a minuscule share in the $100 billion global tool market, with 1.8% in hand tools ($600 million exports) and 0.7% in power tools ($425 million exports).
- In contrast, China commands nearly 50% of the global market.
Amid geopolitical realignments, including US tariffs on Chinese goods, India has a strategic window of opportunity to expand its role in global manufacturing.
- The NITI Aayog report proposes a roadmap for India to achieve:
- 10% global share in power tools (valued at $12 billion).
- 25% global share in hand tools (valued at $25 billion).
- Target year: 2035.
- This expansion can potentially generate 3.5 million jobs, significantly contributing to economic and employment growth.
Structural Cost Disadvantages: Hindrances to Global Competitiveness
- Indian industries face a 14-17% cost disadvantage compared to global peers.
- Key structural barriers:
- High raw material costs.
- Low labour productivity due to restrictive overtime regulations.
- Elevated logistics costs for inland transport.
- Higher interest rates for industrial financing.
- Expensive captive power costs (₹18/unit vs ₹7–8/unit for grid).
Three-Pillar Strategy for Sectoral Transformation
- World-Class Industrial Clusters
- Proposal to develop 3–4 industrial clusters for hand tools by 2035, covering 4,000 acres.
- One cluster is proposed in Punjab, with others in states like Maharashtra.
- Key infrastructure components:
- Plug-and-play infrastructure.
- Worker housing, effluent treatment, and reliable utilities.
- R&D and testing facilities, convention centres.
- 24/7 electricity access to reduce generator reliance.
- Liberalisation of Floor Area Ratio (FAR) and land-use norms to enhance usable space.
- Structural Reforms to Reduce Factor Market Disabilities
- Rationalise Quality Control Orders (QCOs) to simplify compliance.
- Reduce import duties on:
- Inputs like steel, PVC, and motors.
- Capital machinery.
- Simplify EPCG (Export Promotion Capital Goods) requirements.
- Lower penal provisions, including interest penalties.
- Reform labour laws:
- Increase overtime flexibility.
- Align wage norms with global standards.
- Address logistics and transport costs from inland manufacturing hubs.
- Ensure faster approvals via a Cluster Authority.
Complementary Measures for Sustainable Growth
- Enact flexible regulations for:
- Labour.
- Building and factory laws.
- Environmental clearance processes.
- Promote technology transfer through:
- Simplified visa processes.
- Ease of import of machinery and technical tools.
- Strengthen domestic R&D ecosystem through government-industry collaboration.
Key Export Products and Geographic Focus
- Top exported items: Wrenches, pliers, screwdrivers, and drills.
- Key exporting states: Punjab and Maharashtra.
- Establish an independent R&D Governing Council with industry and government representation.
- Targeted Fiscal and Bridge Support
- ₹12,000 crore proposed for cluster development.
- To be recovered via leasing fees and O&M charges.
- ₹45,000 crore expected investment from industry players over the decade.
- If reforms are delayed, provide:
- ₹5,800 crore over 5 years as bridge support.
- ₹3,450 crore for hand tools.
- ₹2,230 crore for power tools.
- ₹5,800 crore over 5 years as bridge support.
- If reforms are implemented on time, existing schemes like RoDTEP and duty drawbacks would suffice.
- ₹12,000 crore proposed for cluster development.
Conclusion: A Sector with Transformational Potential
- With the right policy mix—cluster development, structural reforms, and targeted fiscal support—India can become a major global hub in hand and power tools manufacturing.
- Leveraging geopolitical shifts and domestic competitiveness, the sector holds the potential to create 3.5 million jobs and enhance India’s share in global trade.
- The proposed framework by NITI Aayog presents a blueprint for Atmanirbhar Bharat, aligning with Make in India and employment generation goals.
