Hand and Power Tools Sector | 16 Apr 2025

Source:PIB 

Why in News? 

NITI Aayog (National Institution for Transforming India) released a report titled ‘Unlocking $25+ Billion Export Potential – India’s Hand & Power Tools Sector’, outlining a roadmap to boost Tools exports to USD 25 billion by 2035, supporting the vision of Viksit Bharat @2047. 

What are the Key Trends in the Hand and Power Tools Sector? 

• Global Market: The global tools market, valued at around USD 100 billion in 2022, is projected to grow to USD 190 billion by 2035. 
  • The market is divided into hand tools (USD 34 billion, expected to grow to USD 60 billion) and power tools (USD 63 billion, expected to grow to USD 134 billion), with balanced growth in both sectors. 
  • China dominates global exports, holding about 50% of the hand tools market with USD 13 billion and 40% of the power tools market with USD  22 billion 
• India’s Current Position: India’s tools industry is a small player globally, with USD 600 million in hand tools exports (1.8% global market share) and USD 425 million in power tools exports (0.7% global market share). 
• Opportunity for India: India has the potential to unlock USD 25 billion in exports by targeting 10% of the global market share in power tools and 25% in hand tools by 2035. 
  • Achieving this target could create 3.5 million jobs, contributing significantly to India's economic growth and employment and position India as a global leader in the tools industry. 

What are the Challenges Undermining India’s Tools Industry? 

• Cost Competitiveness: India faces a 14-17% cost disadvantage compared to China. 
  • Although India’s labor is cheaper than China’s, restrictive labor laws (e.g., limits on overtime and daily working hours) reduce labour flexibility and increase operational costs  
  • Unreliable power supply and high costs of maintaining captive generators for electricity (INR 18/unit) further add to the operational expenses. 
• Raw Material Dependency: India, despite being a major steel producer, relies heavily on imports of high-quality raw materials and components, with finished stainless steel imports expected to hit a record 1.3 million tonne (MT) in FY25. 
  • High export duties by countries like China and Vietnam on materials like scrap steel hinder raw material access. 
• Technical Limitations: Limited access to advanced manufacturing technologies and insufficient Research and Development (R&D) capabilities are hindering innovation. 
  • Indian manufacturers rely on imported high-value components, like ratchets for spanners, leading to higher production costs and hindering domestic value chain capture. 
• High Machinery Costs: The tools industry also faces high machinery costs, particularly for advanced machinery like CNC (Computer Numerical Control) machines, which are essential for precision manufacturing.  
  • These machines are subject to import duties and surcharges, further raising costs. 
• Scaling Constraints: Limited availability of industrial land, especially in key hubs like Punjab, where land costs range from Rs 3-5 crores per acre.  
  • High transport costs from inland states like Punjab raise export expenses, reducing India’s global competitiveness. 
  • India's tools sector is dominated by small-scale units with limited resources, hindering scalability and innovation.  
  • Regulatory barriers, such as strict Floor Area Ratio (FAR) norms, further limit land usability, hindering efficient scaling and the industry's ability to compete globally. 
• Inadequate Government Schemes: Existing financial support schemes like Remission of duties and taxes on exported products (RoDTEP) are not efficiently addressing the industry's financial needs. 
  • For example, the RoDTEP rebates for hand and power tools exporters are minimal (1.1% and 0.9% of Freight on Board (FOB) value respectively), which is insufficient to address the 15% cost disadvantage faced by Indian manufacturers.  
  • High taxes and complex export obligations discourage small manufacturers. India’s effective tax rate (34%) is higher than China (25%) and Vietnam (20%). 
    • Unlike China and Vietnam, India lacks R&D tax incentives, making it less attractive for manufacturers. 

How Can India Strengthen and Modernise Its Tools Industry? 

• Building Specialized Tool Clusters: NITI Aayog's report suggests developing 3-4 hand tool clusters covering approximately 4,000 acres by 2035, including one in Punjab, to improve production efficiency and attract investment. 
  • Clusters should feature plug-and-play infrastructure with worker housing, R&D facilities, testing centers, and reliable utilities like water and power. 
  • A Public-Private Partnership (PPP) model involving a Special Purpose Vehicle (SPV), private developers, and a Cluster Authority should be adopted for governance and development. 
• Address Raw Material Challenges: Rationalize Quality Control Orders (QCOs) and reduce import duties on essential raw materials like steel, PVC, and motors. 
• Simplify Policies: Simplify the Export Promotion Capital Goods (EPCG) scheme by easing Authorized Economic Operator (AEO) requirements, reducing penalties like interest on defaults, and lowering import duties on machinery. 
  • Under the National Manufacturing Mission (NMM) announced in Budget 2025-26, simplify regulatory approvals for tools Micro, Small and Medium Enterprises (MSMEs) and establish dedicated R&D councils to foster technological advancements. 
• Liberalization of Land Regulations: Relaxation of FAR norms and industrial land regulations can help MSMEs access affordable land for scaling production.  
  • This will reduce production costs and enable manufacturers to expand capacity efficiently. 
• Adoption of Advanced Manufacturing Technologies: India should encourage the adoption of cutting-edge technologies such as 3D printing in tool manufacturing. This will improve precision, reduce costs, and enhance production efficiency. 
• Diversifying Product Range: Indian manufacturers should target premium tools like battery-powered, high-precision, and automated variants to tap global demand and widen market reach. 

Conclusion:

To realize its USD 25 billion export potential by 2035, India’s tools industry needs targeted policy support, robust infrastructure, and greater R&D investment. Addressing raw material bottlenecks, scaling challenges, and high operational costs is crucial. With strategic reforms and technology adoption, India can emerge as a global manufacturing hub.