Capital goods sector has been consistently growing at double digit growth for the last few years.  However in the current financial year (2008-09) during April-October 2008 this sector has shown decline in growth to 9.2% against 20.3% in the same period last year.  This is attributed to the general slowdown in the economy.

Manufacturing has been recognized as the main engine  for economic growth and creation of wealth and accordingly, emphasis was placed on growth of industry in most of the Five Year Plans. However the share of manufacturing has been stagnating at a low level of 17% of GDP for over two decades. One of the major reasons for the reduced level of contribution by Manufacturing has been the inability of the country to build and maintain competitiveness needed to meet the global challenges as well as to develop a larger domestic market through low cost production. The negative impact of protection given to Indian industry through the aegis of licensing until 1991 has not yet worn off.

The manufacturing sector grew at an average rate of around 7% per annum during a twenty year period. The share of this sector in the GDP stagnated around 17%. The share of manufacturing in the GDP as well as its own growth rate over the two decades has not been consistent. The share of manufacturing in the year 1980 was 16.3% of GDP. This rose to 17.2% by 1990 and 18.25% by 1996-97. However, it declined in the subsequent years to about 16% by the year 2000. Within this period of two decades while the average growth of manufacturing was 7 percent, the sector was able to achieve a creditable growth rate of around 9 to 10% in spells, i.e., between 1988-91, 1993-97 and again 2003-2005.

Heavy Industry & Public Sector Enterprises play a pivotal role in almost all sectors of Indian economy.  The Department of Heavy industry (DHI) has 34 operating Public Sector Enterprises (PSEs) under its administrative control.  These PSEs are engaged in manufacturing, consultancy and contracting activities.  The Department is also entrusted with the development & growth of Automotive Sector and Heavy Electrical/Heavy Engineering Sectors in the country.  One PSE (Bharat Wagon Engineering Co. Ltd.) has since been transferred  to M/o Railways and one more PSE (Praga Tools Ltd.) has since been merged with HMT(MT) Ltd.,  thus leaving the Department with 32 PSEs.  Out of 32 PSEs,16 are profit making and remaining 16 are incurring loss. However, on an aggregate basis PSEs of DHI have shown a profit before tax of Rs.2783 crore in 2007-08.

The range of machinery produced in India includes heavy electrical machinery, textile machinery, machine tools, earthmoving and construction equipment including mining equipment, road construction equipment, material handling equipment, oil & gas equipment, sugar machinery, food processing and packaging machinery, railway equipment, metallurgical equipment, cement machinery, rubber machinery, process plants & equipment, paper & pulp machinery, printing machinery, dairy machinery, industrial refrigeration, industrial furnaces etc. However, the raw materials used are largely domestic in origin and in many instances, the quality of domestic raw materials is not up to the international standards in terms of dimensional tolerances and metallurgical properties, which in turn affects the quality of the final product.

The machine tools industry can be divided into metal cutting and metal forming sectors. The metal cutting sector can be further classified into conventional and computer numeric control (CNC) machines, while the metal forming sector can be segregated into conventional and numeric control (NC) machines. The Indian industry manufactured its early products through technical collaborations from world-renowned manufacturers. From the mid eighties onwards the industry has relied entirely on its own R&D efforts to develop and market a contemporary range of CNC machine tools. The present turnover of the industry is totally from products developed by the industry in the last decade.