Unlocking India’s Hand and Power Tools Potential

The NITI Aayog recently launched a report titled “Unlocking $25+ Billion Export Potential India’s Hand & Power Tools Sector.” This report marks the potential of the hand and power tools industry in driving India’s economic growth. It identifies challenges and outlines necessary interventions to strengthen this sector and enhance its global competitiveness.

Current Market

The global market for hand and power tools is valued at around $100 billion and is expected to grow to approximately $190 billion by 2035. Hand tools currently represent a $34 billion market, projected to expand to $60 billion. Power tools, including accessories, are valued at $63 billion and are anticipated to surge to $134 billion.

India’s Current Position

India’s presence in this market is modest. The country exports $600 million in hand tools, accounting for 1.8% of the market, and $470 million in power tools, with a 0.7% market share. In contrast, China dominates the sector, controlling about 50% of hand tools and 40% of power tools globally.

Export Potential and Job Creation

The report suggests that India has the potential to capture a larger share of the global market. Achieving a target of $25 billion in exports over the next decade could create approximately 3.5 million jobs. This would require India to secure a 10% market share in power tools and a 25% share in hand tools.

Challenges Facing the Sector

India faces several challenges that hinder its competitiveness. A 14-17% cost disadvantage compared to China arises from higher structural costs and smaller operational scales. Elevated raw material costs, lower labour productivity, and higher logistics expenses further exacerbate these issues.

Recommended Interventions

The report recommends several key interventions to boost the sector:

• Developing Hand Tool Clusters – Establishing 3-4 world-class clusters with advanced infrastructure is critical. These clusters should operate under a public-private partnership model.
• Addressing Structural Cost Disadvantages – Implementing market reforms is necessary, including rationalising quality control orders and import duties on raw materials. Simplifying export promotion schemes and reforming building regulations and labour laws are also essential.
• Providing Cost Support – Offering bridge cost support to offset disadvantages is crucial. The report suggests that this should be viewed as an investment rather than a subsidy.

Future Outlook

The tools industry is a foundational pillar of the global manufacturing ecosystem. By enhancing domestic manufacturing and expanding its global footprint, India can achieve its ambition of becoming a global manufacturing hub. The Hand and Power Tools sector will play a vital role in this journey towards economic growth and development.

Questions for UPSC:

1. Critically analyse the challenges and opportunities in India’s hand and power tools sector.
2. What are the key reforms needed to improve India’s manufacturing competitiveness in global markets? Explain.
3. What is the significance of public-private partnerships in developing industrial clusters? Provide suitable examples.
4. What is the impact of rising raw material costs on manufacturing industries? How can India mitigate these challenges?

Answer Hints:

1. Critically analyse the challenges and opportunities in India’s hand and power tools sector.

1. Challenges include a 14-17% cost disadvantage compared to China due to higher structural costs and lower operational scales.
2. India’s market share is low, with only 1.8% in hand tools and 0.7% in power tools, limiting its global competitiveness.
3. Opportunities exist to capture $25 billion in exports, potentially creating 3.5 million jobs by targeting 10% in power tools and 25% in hand tools.
4. Innovation and MSME empowerment can strengthen the industrial ecosystem and enhance global competitiveness.
5. Addressing logistical challenges and improving productivity are crucial for realizing growth potential.

2. What are the key reforms needed to improve India’s manufacturing competitiveness in global markets? Explain.

1. Rationalizing Quality Control Orders (QCO) and import duties on essential raw materials to reduce costs.
2. Simplifying the Export Promotion Capital Goods (EPCG) scheme to ease requirements for exporters.
3. Reforming building regulations and labor laws to enhance operational efficiency and flexibility.
4. Establishing world-class hand tool clusters under a public-private partnership model to improve infrastructure.
5. Providing bridge cost support as an investment to offset disadvantages, ensuring long-term growth potential.

3. What is the significance of public-private partnerships in developing industrial clusters? Provide suitable examples.

1. Public-private partnerships (PPPs) can facilitate investment in infrastructure, ensuring clusters have advanced facilities.
2. They enable sharing of resources and expertise between government and private sectors, enhancing operational efficiency.
3. Examples include the development of industrial parks where both sectors collaborate on planning, funding, and management.
4. PPPs can lead to job creation and economic growth through shared risk and innovation in cluster development.
5. Successful clusters can serve as models for future projects, promoting sustainable industrial growth.

4. What is the impact of rising raw material costs on manufacturing industries? How can India mitigate these challenges?

1. Rising raw material costs can increase production expenses, leading to reduced competitiveness in global markets.
2. Manufacturers may face lower profit margins, impacting investment and innovation in the sector.
3. India can mitigate these challenges by reforming import duties on raw materials and improving local sourcing strategies.
4. Enhancing productivity through technology adoption can help offset cost increases and improve efficiency.
5. Collaborative approaches with suppliers to stabilize prices and secure long-term contracts can also be beneficial.