Capital
Goods Policy : Some Questions
On
25 May 2016 , NDA Cabinet approved Capital Goods Policy ( 2025 ) document
It
is a very exhaustive and well-researched paper , providing a lot of statistics
These
include following targets :
#
PRODUCTION
Rs
2.3 lakh*crore ( in 2014-14 ) to go up to Rs 7.5 lakh*crore in 2025
An
increase of Rs 5.2 lakh*crore ( by the tenth year )
#
EMPLOYMENT
84
lakh ( in 2014-15 ) to go up to 300 lakh in 2025
An
increase of 216 lakh ( by the tenth year )
Here
are some " Back of the Envelope " type of calculations :
#
PRODUCTION PER EMPLOYEE
Rs
2.74 lakh ( in 2014-15 ) going DOWN to Rs 2.50 lakh*crore ( in 2025 )
Is
this in to-day's RUPEE terms ? At today's SELLING
PRICES ?
If
not , what would this figure be , if NOT adjusted for
inflation ?
#
CAPITAL OUT-PUT RATIO
I
believe , this is close to ONE , for most of the sub-sectors covered under
Capital Goods Industry
If
I am right , then the TOTAL CAPITAL EMPLOYED ( TCE ) currently in this industry
, ought to be approximately the SAME as the value of production , ie : Rs 2.3
lakh*crore
Now
, let us assume ( correct me if I am wrong ) that the INCREMENTAL CAPITAL
OUTPUT RATIO ( ICOR ) for this industry is 4.0
That
is , for each additional rupee of production , we need to employ , FOUR rupees
of Capital
If
so , to raise OUTPUT by additional Rs 5.2 lakh*crore , we would need to inject
into the industry , Rs 20.8 lakh*crore worth of additional Capital , over a
period of 10 years ( 5.2*4 )
In
turn , this raises following questions :
Will
private sector come forward to make such investments when the current Capacity
Utilization of the industry is stagnating around 60 % only , for want of orders
- which , often need a lead-time of 2 years to execute ?
And
, when IMPORTS constitute nearly 40 % of the annual purchases of Capital
Goods ?
When
capital goods manufacturers in the shrinking economies of Europe / Japan / China
, are offering " deep discounts " to sell their products to Indian
buyers ?
I
know of a Machinery Manufacturer of Italy , who depends upon Indian Buyers for
sale of 50 % of his factory output !
When
gestation period for setting up a factory to make Capital Goods , can easily
take 3 years ?
I
hope CII / FICCI / ASSOCHAM etc will conduct an ONLINE SURVEY of their Members
and elicit their OBJECTIVE ASSESSMENT of the newly announced policy , in order
to provide a QUICK FEEDBACK to the government
-------------------------------------------------------------------------------------
29
May 2016
www.hemenparekh.in / blogs
hemen
parekh
Marol
, Mumbai , India
(
M ) +91 - 98,67,55,08,08
No comments:
Post a Comment