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NITI Aayog
Government of India
Sansad Marg, New Delhi - 110001, India
Report Name - Unlocking $25+ Billion Exports : India’s Hand & Power
Tools Sector
Available at: https://niti.gov.in/
Copyright @NITI Aayog
Published: April, 2025
UNLOCKING $25+ BILLION EXPORTS:
INDIA’S HAND & POWER TOOLS SECTOR
ii
iii
Ramesh Mangaleswaran Foundation for Economic Development
Board Chair Okhla Phase III, New Delhi - 110020
Tele: 011 4003 9300
Email: info@fedev.org
MESSAGE
Heavy and engineering goods form the backbone of any country’s manufacturing sector, serving as
essential capital inputs across industries and offers a significant opportunity for exports. Among engineering
goods, tools represent a crucial category—characterized by their low complexity, labor intensity and broad
application—supporting key sectors such as automobiles, construction, and infrastructure development.
Enhancing competitiveness in the tools industry is a vital first step in establishing India’s prominence in the
global heavy and engineering goods sector.
Over the past two decades, India has experienced steady growth in hand tools manufacturing, driven by
improvements in its manufacturing ecosystem and the entrepreneurial ambition of Indian players. However,
despite these positive developments, several structural challenges hinder India’s ability to scale and
compete effectively in the global market. High raw material costs, expensive financing options, and
inefficiencies in labor and land utilization due to stringent regulatory requirements pose significant barriers
to growth. On the other hand, production of power tools is concentrated with few global players,
necessitating foreign investment for growth. It is estimated that India could export $25 billion worth of tools
and create 3.5 million jobs by 2035 with a competitive and strong manufacturing ecosystem.
Recent geopolitical shifts have created an opportune moment for India to act. The U.S. has adopted a firm
stance on import duties for Chinese goods, and Vietnam has emerged as a strong competitor in power tools
manufacturing. Global markets are actively seeking alternatives to China to diversify and de-risk their supply
chains. To capitalize on these shifts, India must act swiftly before global supply chains establish a new
equilibrium, solidifying alternative manufacturing hubs.
This report delves deeper into India’s competitive challenges and explores key policy and industry
interventions required to scale up production, attract investment, and strengthen its global positioning. I
trust that this report will contribute to overcoming the existing obstacles and support effective
implementation of proposed measures. Foundation for Economic Development will continue to support the
government in this initiative.
[Ramesh Mangaleswaran] Preface
India stands at a defining juncture in its economic journey, poised to harness its latent potential
and emerge as a global leader in manufacturing and trade. The tools industry, encompassing hand
and power tools, represents a critical yet underexplored avenue for this transformation. As the
backbone of the global manufacturing ecosystem, tools enable production across sectors, from
infrastructure to automotive, and hold the key to unlocking significant economic value. It is
with this vision that we present “Unlocking $25+ Billion Exports: India’s Hand & Power Tools
Sector”, a collaborative effort by NITI Aayog and the Foundation for Economic Development,
published in April 2025. This report is both a clarion call and a roadmap, urging policymakers,
industry leaders, and stakeholders to seize a transformative export opportunity worth over $25
billion in the next decade.
The genesis of this report lies in a recognition of India’s unique strengths i.e abundant low-
cost labour, a growing manufacturing base, and strategic trade positioning—juxtaposed
against its modest global presence in the tools sector. While the global trade market for tools
stands at ~$100 billion in 2022, projected to reach $190 billion by 2035, India’s share remains
a fraction, with exports of $600 million in hand tools and $425 million in power tools. China’s
near - 50% market dominance underscores the scale of the challenge, yet recent shifts, such as
tariffs on Chinese goods and rising costs, offer India a rare window to redefine its role. This
report emerges from six months of rigorous research, including consultations with 15 industry
players and vendors, to distil actionable insights that can propel India toward a 10% share in
power tools and 25% in hand tools, generating 3.5 million jobs along the way.
Our objective is clear: to create a competitive ecosystem that empowers India’s tools industry
to thrive globally. The challenges are multifaceted such as cost disadvantages, limited technical
know- how, and inadequate infrastructure, but they are not insurmountable. Through this report, we
propose a strategic framework anchored in three pillars: building world-class industrial clusters,
reforming structural cost barriers, and providing targeted support where needed. These
interventions, developed with inputs from global best practices and local realities, aim to bridge the
14-17% cost gap with competitors and position India as a hub for high-quality, cost- effective
tools.
As we release this report in April 2025, we are mindful of the urgency. The tools industry is not
merely an economic lever; it is a catalyst for inclusive growth, empowering small and medium
enterprises and regions like Punjab and Maharashtra. We invite policymakers to act decisively,
industry to innovate boldly, and partners to collaborate earnestly. Together, we can transform
this $25 billion opportunity into a reality, strengthening India’s economic fabric and its standing
on the world stage. This report is a beginning and tries to put forward a blueprint for a future
where India’s tools shape not just products, but progress.
vii
viii Table of
Contents
Executive Summary 1
Chapter -1: Introduction to Tools Industry 5
Chapter -2: Global Market Size and Trends 6
Chapter -3: Global Supply Chain 7
Chapter -4: Global Market Overview 8
Chapter -5: Opportunities in Exports Markets and Global Trade Barriers 9
Chapter -6: India’s Tool Industry 10
Key Products Exported 10
Key Exporters 10
Chapter -7: India’s Potential to Expand 12
Chapter -8: The Tools Opportunity 13
Chapter -9: Challenges Facing the Tool Industry 14
Cost Competitiveness 14
Technical Know-How 19
Limited Availability of Land for Cluster Expansion 20
Chapter -10: Government Schemes are Limited by Amounts and Applicability 21
Central Government Schemes 21
Punjab Government Schemes 21
Maharashtra Government Schemes 23
Chapter -11: Key Policy Interventions 24
Create World Scale and World Class Clusters for Hand Tools 24
Reduce Factor Market Disabilities Through Structural Reforms 27
Factor Market Interventions Would Bridge the Cost Disability in the Hand and Power Tools Sector 28
Key Policy Recommendations and Conclusion 31
Appendix 34
Acknowledgement 39
ix Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Executive Summary
The tools industry, encompassing both hand and power tools, serves as a foundational pillar of
the global manufacturing ecosystem, enabling production across a wide array of sectors, from
construction to automotive and beyond. The report “Unlocking $25+ Billion Exports: India’s
Hand & Power Tools Sector,” jointly published by NITI Aayog and the Foundation for Economic
Development in April 2025, underscores the transformative potential of this industry for
India’s economic growth. With a global trade market valued at ~$100 billion in 2022, projected to
reach $190 billion by 2035, the tools sector presents a significant opportunity for India to
enhance its export footprint, create millions of jobs, and establish itself as a competitive player
on the world stage. This executive summary encapsulates the report’s findings, highlighting the
global market dynamics, India’s current position, the export opportunity worth over $25 billion,
the challenges impeding progress, and a strategic roadmap to unlock this potential.
Global Market Overview and Trends
The global tools market is segmented into hand tools and power tools, with distinct growth
trajectories and competitive landscapes. As of 2025, hand tools account for $34 billion of the
~$100 billion of market, expected to grow to $60 billion by 2035. Power tools including tools
accessories, predominantly electrical, constitute $63 billion and are also projected to reach
$134 billion by 2035, reflecting a balanced growth pattern across both categories. This
expansion is driven by rising industrialization, infrastructure development, and technological
advancements in tool manufacturing, particularly in power tools where electrification and
automation are key trends.
China dominates the global export market, commanding nearly 50% of the trade with $16 billion
in hand tools and $22 billion in power tools exports. This dominance is attributed to its scale of
operations, cost efficiencies, and well-established supply chains. However, shifts in global trade
dynamics—such as the additional tariffs imposed by the United States on China between 2016
and 2019—have opened opportunities for other nations. Vietnam, for instance, has capitalized
on this shift, doubling its exports annually, while India’s exports have grown at a modest 25%
rate. This disparity underscores both the potential and the challenges India faces in seizing a
larger share of the market.
India’s Position in the Tools Industry
India’s tools industry, though promising, remains a small player globally. In 2025, the country
exports $600 million in hand tools, representing a 1.8% market share, and $425 million in power
tools, equating to a mere 0.7% share. Key products exported include wrenches, pliers, screwdrivers,
and drills, with major exporters concentrated in states like Punjab and Maharashtra. Despite its
advantages, such as low-cost labour and a growing manufacturing base. India struggles to
compete effectively due to structural inefficiencies and a lack of scale. The report identifies a $25
billion export opportunity over the next decade, achievable by targeting a 10% market share in
1 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
power tools and a 25% share in hand tools. This ambition could generate approximately 35 lakh (3.5
million) jobs, significantly boosting employment and economic development.
The $25+ Billion Opportunity
The $25 billion export target is not merely aspirational but grounded in India’s inherent strengths
and emerging global opportunities. The decline in China’s cost advantage due to tariffs and rising
labour costs, coupled with India’s proximity to key markets and trade agreements, positions
the country favourably. However, realizing this potential requires overcoming a 14-17% cost
disadvantage compared to China, driven by higher structural costs and smaller operational
scales. The report breaks down this disadvantage into specific components: 10-12% stems from
structural issues, including higher raw material costs (e.g., steel, plastic, motors), lower labour
productivity due to restrictive overtime regulations, elevated interest rates, and logistics costs
for transporting goods from inland states to ports. Addressing these challenges systematically
could propel India toward its export goals.
Challenges Facing the Tools Industry
The report identifies several critical challenges that hinder India’s tools industry from achieving
its full potential:
1. Cost Competitiveness: India’s 14-17% cost disadvantage is a significant barrier.
Higher raw material costs, exacerbated by import restrictions like Quality Control
Orders (QCOs), increase production expenses. Labour productivity is hampered by
overtime wage requirements and limits, while high interest rates and inland logistics
costs further erode competitiveness.
2. Technical Know -How: The industry suffers from limited access to advanced
manufacturing technologies and research and development (R&D) capabilities,
constraining innovation and quality improvements.
3. Limited Availability of Land: The lack of sufficient land for industrial cluster
expansion restricts scalability, a critical factor in competing with China’s large-scale
operations.
4. Government Schemes: Existing support mechanisms, such as the Remission of
Duties and Taxes on Exported Products (RoDTEP) and duty drawback schemes, are
limited in scope and disbursement efficiency, leaving gaps in financial assistance.
These challenges collectively undermine India’s ability to capitalize on global demand
and require urgent, targeted interventions.
2 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Strategic Roadmap and Policy Interventions
To unlock the $25 billion export opportunity, the report proposes three categories of
interventions, each addressing specific aspects of the identified challenges:
1. Building World-Class Hand Tool Clusters
The creation of advanced industrial clusters is a cornerstone of the strategy. The report
recommends establishing 3-4 clusters aggregating approximately 4,000 acres, including one
in Punjab, a traditional hub for tool manufacturing. These clusters should feature:
1. Plug-and-Play Infrastructure: Ready-to-use facilities to reduce setup times for
businesses.
2. Worker Housing: Affordable accommodations to attract and retain labour.
3. Connectivity and Amenities: Robust transportation links and convention centers to
enhance operational efficiency and market access.
Development and operation of these clusters should follow a Public-Private Partnership
(PPP) model, drawing on global best practices from countries like Germany and Japan.
Investment requirements are substantial, but the PPP approach ensures shared risk and
sustainable funding. Governance structures for clusters and dedicated R&D centers are also
proposed to foster innovation and quality standards.
2. Addressing Structural Cost Disadvantages Through Market Reforms
Structural reforms are critical to bridge the cost gap with competitors. Key recommendations
include:
1. Rationalizing QCO Restrictions: Ease import restrictions on essential raw materials
like steel to lower production costs.
2. Reducing Import Duties: Lower duties on raw materials and machinery to enhance
cost competitiveness.
3. Simplifying Export Promotion Capital Goods (EPCG) Scheme: Reduce penal
provisions and streamline Authorized Economic Operator (AEO) requirements to
improve utilization.
4. Reforming Building and Labour Regulations: Simplify compliance to reduce
operational burdens and enhance labour flexibility.
These reforms aim to eliminate the 10-12% structural cost disadvantage, aligning India’s
production costs more closely with global benchmarks.
3 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
3. Bridge Cost Support
The report evaluates the need for additional financial support to offset cost disadvantages:
1. If factor market interventions are fully implemented and existing incentives (e.g.,
RoDTEP) are disbursed efficiently, no additional bridge support is required.
2. However, if reforms falter, an additional INR 5,800 crores (approximately $700 million)
over five years is estimated to be necessary. This support would complement existing
schemes and is framed as an investment, not a subsidy, with a projected 2-3x return
in tax revenues over the same period.
This conditional approach ensures fiscal prudence while providing a safety net for industry
growth.
Implementation and Impact
The proposed interventions are interconnected, requiring coordinated action across
government, industry, and private stakeholders. The establishment of world-class clusters
addresses scalability and infrastructure deficits, while market reforms tackle cost
competitiveness. Bridge support serves as a contingency to maintain momentum if structural
changes lag. Together, these measures could elevate India’s tools industry to a global leader,
capturing significant market share from competitors like China and Vietnam.
The economic impact is profound: achieving the $25 billion export target by 2035 would not
only bolster India’s trade balance but also create 3.5 million jobs, many in small and medium
enterprises (SMEs) that dominate the sector. This job creation aligns with India’s broader goals
of inclusive growth and rural development, given the industry’s presence in states like Punjab
and Maharashtra.
Conclusion
The report “Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector” presents a
compelling case for strategic investment in the tools industry. India stands at a pivotal moment,
with global trade shifts offering a window to challenge China’s dominance and establish a
robust export ecosystem. By addressing cost disadvantages, scaling operations through world-
class clusters, and implementing market reforms, India can transform its tools industry into a
$25 billion export powerhouse by 2035. This transformation requires bold policy action, public-
private collaboration, and a commitment to overcoming structural barriers. The stakes are
high, but so are the rewards: millions of jobs, enhanced global competitiveness, and a stronger
economic foundation for India’s future.
4 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 1
Introduction to Tools Industry
India’s goal of becoming a global manufacturing hub requires a robust domestic capital goods
sector. The “Make in India” initiative, launched by the Prime Minister in 2014, is a pivotal step
toward achieving this vision. The initiative aims to make India a global centre for design and
manufacturing, across 15 key sectors, including capital goods. While heavy engineering,
machine tools, and automotive sectors are covered under the scope of Department of Heavy
Industries, the tools industry, a key part of the capital goods sector, is often overlooked.
Tools, typically hand-held, play a crucial role in processes like drilling, cutting, sanding, and
polishing. Like other capital goods, tools are indispensable for supporting manufacturing
across a variety of industries. Their applications span both industrial operations (e.g., fastening
bolts in cars or cutting pipes) and everyday tasks. Key sectors relying heavily on tools include
construction, electronics, automotive, and aerospace.
Tools are broadly classified into two categories:
1. Hand Tools: These are non-motorized tools that rely on manual effort. Common
examples include wrenches, screwdrivers, pliers, hammers, knives, and handsaws.
Hand tools are affordable and ideal for tasks requiring precision and human control.
Category HS Codes
Hand Tools
8201, 8202, 8203,8204,8205,8206, 820810, 820820, 820830, 820840,
820890, 8210, 842519, 842539, 842541, 842549
Figure 1: HSN codes for hand tools
2. Power Tools: Power tools can be classified as electric, hydraulic, and pneumatic. Electric
power tools run on electricity and often include motors. These are further divided into:
• Corded Tools: Operate using a direct power connection.
• Cordless Tools: Powered by batteries, offering enhanced mobility.
Examples include electric drills, saws, electric screwdrivers, grinders, and cutters.
Category HS Codes
Power Tool – Hand Operated 8467, 8468, 842511, 842531, 842542
Tools Accessories (including
Interchangeable tools for hand and
machine tools)
8207, 420291, 871620, 901780
Figure 2: HSN Codes for Power Tools
While hand tools are affordable, labor-intensive, and ideal for precision tasks, power tools have
higher cost and maintenance but enable automation and improve efficiency. Both types of
tools are essential for driving industrial growth and enhancing productivity.
Introduction to Tools Industry 5 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 2
Global Market Size and Trends
The global tools market, encompassing both hand and power tools, was valued at around
$100 billion in 2022. It is projected to grow at a compound annual growth rate (CAGR) of 5.3%,
reaching $190 billion by 2035 (Figure 3).
Power tools market represents $63 bn out of $100 billion market and expected to grow to $134
bn at the rate of 6%. The power tools market is particularly experiencing rapid growth driven
by increased industrialization, rising disposable income levels, and the growing popularity of
Do-it-yourself (DIY) activities. Electric tools dominate the global power tools market, accounting
for almost 70% of the segment, with products like angle grinders and ply cutters leading the
trade Figure 4.
Figure 3: Global hand tools and power tools market in $billion.
The hand tools market of $34 billion, while growing at a slower rate of 4.5%, remain vital for
specific applications. Within this segment, hand saws account for 16% of the global hand tool
trade market, while spanners and wrenches represent 12% of the market share (Figure 4).
Figure 4: Market share of different types of tools by product categories
Global Market Size and Trends 6 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 3
Global Supply Chain
The supply chains for hand tools and power tools exhibit distinct characteristics, driven by
variations in industry structure, manufacturing strategies, and market dynamics.
Hand tools:
The global hand tools industry is highly fragmented, characterized by localized supply chains
spread across multiple regions. The top four companies collectively account for only 20% of
the market, with manufacturing spread across 10-20 locations worldwide (Figure A. 1). For
instance, Apex Tool Group operates 20 factories in countries like the US, Mexico, Germany, and
Canada. These facilities rely on diverse suppliers for raw materials such as steel bars, cobalt,
and tungsten. This decentralization highlights the localized and diverse nature of hand tool
production.
Power tools:
In contrast, the power tools industry is more consolidated, with the top six players controlling
70% of the market (Figure A. 1). Production is concentrated in fewer locations, reflecting
the capital-intensive and technology-driven nature of the industry. For example, leading
manufacturers such as Makita operate facilities in seven countries, whereas Hilti Corporation
operate facilities in four countries. These manufacturers procure raw materials like metals,
resins and components, batteries, motors, transmissions, and electronics, primarily from
centralized vendors, supplemented occasionally by local suppliers for cost efficiency.
Given the distinct structures and supply chains of these industries, policies should be tailored
accordingly. Anchor investors play a critical role in advancing the power tools sector due to its
high capital requirements for advanced machinery, automation, and research & development
(R&D), as well as the need for sophisticated technological support. In contrast, the hand tools sector,
being more labour-intensive and fragmented, thrives on a broader base of smaller players.
Global Supply Chain 7 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 4
Global Market Overview
The global tools trade market is valued at approximately $100 billion, with China and the
European Union (excluding Germany) leading as the largest exporters. China and Taiwan
together account for 46% of hand tools exports (Figure 5) and 37% of power tools exports
(Figure 6), while the European Union (excluding Germany) contributes 18% and 22% respectively
(Figure 5, Figure 6).
In contrast, India exports represent only 1.8% of the global hand tools trade market and 0.7% of
global power tools trade market, highlighting its limited presence in the market and significant
potential for growth.
Figure 5: Share of global exports and imports of hand tools
Figure 6: Share of global exports and imports of power tools
Global Market Overview 8 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 5
Opportunities in Exports Markets
and Global Trade Barriers
The European Union (EU) and The United States of America (US) are the largest importer of
tools, importing 55-60% of overall global trade. These countries offer significant opportunities
for India to expand its footprint in the global market.
The US has imposed additional tariffs of 7.5-25% on nearly all hand and power tools imported
from China (Figure A. 2 in Appendix), to tackle its unfair trade practices.
While Chinese tools face additional 7.5-25% tariffs when exported to the US, other imports
enjoy general tariffs of 0% for hand tools and approximately 5.5% for power tools (Figure A. 2).
These additional tariffs have significantly slowed China’s export growth, despite its dominance
in market share (Figure 7).
Vietnam has capitalized on the situation, increasing its power tools exports from $5 million
in 2019 to $1.2 billion in 2022. Although India’s exports have also grown by 24% year-on-year
(YOY), there remains considerable untapped potential for further expansion.
Figure 7: Tools exports to the US by China, Vietnam, and India in 2019 and 2022
Opportunities in Exports Markets and Global Trade Barriers 9 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 6
India’s Tool Industry
Key products exported
India’s performance varies significantly depending on the type of tools. Notably within the hand
tools segment, India exports 5% of global spanner & wrench trade while handsaws trade is less
than 1% of global market. Within power tools, India holds 2% market share in pneumatic tools
but less than 1% in electric tools like electric drills and saws (Figure 8).
Figure 8: India’s exports as a percentage of world exports by product category for hand and power tools
Key exporters
India has a strong presence in hand tool segment, primarily due to its labour-intensive nature
and relatively lower technical requirements. This advantage has fostered a thriving ecosystem
dominated by MSMEs. Top players include manufacturers like Groz engineering, JK Files, Shiv
Forgings, Gardex, HR International, with the top 7 players collectively contributing approximately
25% of India’s exports (Figure 9).
Figure 9: Top exporters of hand tools in India
India’s Tool Industry 10 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
India’s hand tools manufacturing is concentrated in 3-4 major clusters, primarily in Jalandhar
and Ludhiana (Punjab), along with Mumbai, Nagpur (Maharashtra), and Nagaur (Rajasthan).
Punjab alone accounts for 80% of India’s hand tool exports, with 12 out of top 15 players based
out of Jalandhar and Ludhiana.
The Jalandhar and Ludhiana clusters emerged during the time of Indian independence in 1947,
when skilled labourers migrated from Pakistan and established hand tools manufacturing units.
The Punjab State Industrial Development Corporation (PSIDC) further supported this growth by
setting up an industrial estate on the outskirts of the city, which has since evolved into a major
hub. In 1983, the Central institute of hand tools was established to provide trained manpower
and technological support, further boosting the sector.
In contrast, India’s power tools sector is less developed than the hand tools sector, with
prominent players such as Stanley, Black and Decker, and Groz Engineering leading production
holding 45% market share. (Figure 10). Multiple other global players like Hilti, TTI, Makita do
not have a decent manufacturing base in India. However, growth in sectors such as automotive,
aerospace, heavy engineering, and infrastructure is driving demand for precision tools such as
drills, cutters, and grinders.
Figure 10: Top exporters of power tools in India
India’s Tool Industry 11 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 7
India’s Potential to Expand
India boasts a robust ecosystem for hand tool manufacturing and exports, yet most of the
global market share is dominated by China, primarily due to its superior cost competitiveness.
However, shifting geopolitical dynamics present a unique opportunity for India to strengthen
its position in the global hand tools market.
Geopolitical opportunities:
The global push to diversify manufacturing bases away from China, combined with US-imposed
additional tariffs on Chinese tools, has created a favourable environment for Indian exports.
However, Vietnam has been quicker to capitalize on these changes, nearly tripling its exports
since 2019, with Chinese companies looking to invest in neighbouring countries in South-East
Asia. India must act swiftly to leverage this window of opportunity.
Current ecosystem and capability:
India already has a robust ecosystem in hand tools segment dominated by MSMEs, which can
be further scaled and expanded.
1. Cost-effective labour: Labour accounts for 15% of production costs in the hand tools
sector. India’s manufacturing labour cost is $1 per hour, significantly lower than
China’s $3.5 per hour, offering a natural competitive edge.
2. Synergies with automotive industry: India’s robust automobile industry has created
an ecosystem for mechanical processes like forging, stamping, and casting, which are
also integral to hand tools manufacturing. Many suppliers involved in automobile
parts production also cater to hand tools production, enhancing cost efficiency.
3. Global quality standards: Indian manufacturers already meet global quality standards
and export to European countries. Products like spanners and wrenches hold 5% of
the global trade market.
In contrast, the power tools industry demands a robust electronic manufacturing ecosystem,
particularly for components like batteries and motors. This area is still underdeveloped in
India. For example, Bosch produced 17 million power tools and battery packs in Malaysia in
2018, compared to India’s 2 million units’ capacity. Addressing these gaps would be critical for
expanding India’s power tools industry.
Policies should leverage existing capabilities within hand tools manufacturing while gradually
building the infrastructure and ecosystem necessary for power tools manufacturing.
To support the growth of both industries, customized policies should address their distinct
global supply chains requirements and ecosystems. The focus of the government on boosting
electronic manufacturing in India is synergistic with power tools.
India’s Potential to Expand 12 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 8
The Tools Opportunity
With opportunities created by geopolitical shifts and strong existing ecosystem, India should
target to improve its cost competitiveness to capture 25% of the global hand tools market by
2035. Achieving this target could unlock an export potential of $15 billion by 2035, creating
approximately 2.5 million (25 lakh) direct and indirect jobs in the country (Figure 11).
Figure 11: Targeted hand tools export opportunity and cumulative direct and indirect jobs created in India
Similarly, in the power tools segment, where China controls 40% of global exports, India targets
a ~10% market share by 2035, translating to an export potential of $12 billion. This growth
could generate approximately 1.3 million (13 lakh) direct and indirect jobs (Figure 12).
Figure 12: Targeted power tools export opportunity and cumulative direct and indirect jobs created in India
The Tools Opportunity 13 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 9
Challenges Facing the Tool Industry
Despite a well-established ecosystem for hand tools manufacturing and a potential for expanding
power tools sector, India has struggled to scale and compete effectively on the global stage in
recent decades. To achieve its ambitious target of 25% of the global market share in hand tools
and 10% in power tools, India needs to address several critical challenges:
1. Cost Competitiveness: India’s manufacturing ecosystem faces higher production
costs compared to China due to expensive raw materials like steel, plastic, and
motors, higher interest cost and taxes, and limited economies of scale.
2. Technical Know -how: A lack of advanced manufacturing capabilities and
insufficient investment in R&D prevents India from producing many high-value
components domestically. This reliance on imported parts diminishes the industry’s
competitiveness and profitability.
3. Scaling Constraints: Limited availability of affordable industrial land and high
upfront capital requirements restrict the expansion of manufacturing operations for
hand tools industry.
Addressing these challenges is vital for India to compete globally and capture a larger share of
the market.
Cost competitiveness
The Indian tools industry faces two major disadvantages compared to China: factor cost
disadvantage and scale disadvantage (Figure 13).
1. Factor Cost Disadvantage: Indian manufacturers incur higher costs due to higher
costs of factors of production such as more expensive steel, motors, and PVC resin,
higher interest rates, and other ecosystem-related expenses.
2. Scale Disadvantage: China benefits from economies of scale, where large-scale
production leads to lower costs. In contrast, India’s smaller scale results in higher
per-unit costs, reducing global competitiveness.
Figure 13 shows a representation of the effect that these cost disadvantages have on India’s
productivity.
First, the higher factor costs, such as expensive raw material, position India on a higher cost
curve compared to China. Second, India’s lower scale of production also amplifies the cost of
production, as cost efficiency improves with larger production volumes due to economies of
scale. The inverse relationship between the scale of production and the cost of production
underscores the critical need for India to increase its scale of production.
Challenges Facing the Tool Industry 14 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Figure 13: Cost of production in India v/s China
Figure 14 and Figure 15 give a detailed cost comparison of manufacturing hand tools and power
tools respectively in India and China. These figures show that India faces a 10-12% structural
disability while scale disability increases the total cost of production in India, eventually bringing
the costs to approximately 14-17%.
Figure 14: Detailed cost comparison of India and China for hand tools sector
Challenges Facing the Tool Industry 15 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Figure 15: Detailed cost comparison of India and China for power tools sector
These disadvantages make it challenging for India to compete with China in tools manufacturing,
affecting its ability to capture a larger share of the global market. Refer below for further details
on higher structural costs in India.
Structural Costs
1 Material Costs
1.1 Cost of raw materials
1.1.1 About 90% of the raw material used in hand tool manufacturing is scrap steel
ingots, the price of which is 16-20% higher in India than in China (INR 55,000
per tonne vs. INR 46,000 per tonne - Figure 16).
Figure 16: Steel prices across India and China (in INR) (including rolling charges of INR 12k per tonne
Challenges Facing the Tool Industry 16 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
1.1.2 As for the power tools sector, other major components are plastic, electronic
components, and motors. Electronics components are approximately 5%
costlier, whereas motors are approximately 10-15% more expensive in India
than in China.
1.1.3 Nylon-6 (a form of plastic used in the production of tools) is 5% costlier than
China (INR 154,000 per metric tonne in India versus INR 146,000 per metric
tonne in China), and PVC resin is 18% costlier in India with the price of PVC
being INR 82,000 per metric tonne in India.
Figure 17: Price of PVC and Nylon-6 across India and China (per metric tonne in INR)
1.2 High import duties and quality control (QCO) restrictions on key raw materials
1.2.1 High import duty levied on key raw materials such as 15% on steel imports,
10-15% on motors, along with 7.5-10% import duty on PVC resins create
inefficiencies in India’s manufacturing ecosystem.
1.2.2 QCO restrictions on these raw materials such as steel and PVC add to the
adversities of Indian manufacturers by increasing their dependence on higher
cost domestic industry.
1.2.3 Moreover, India’s PVC and Nylon-6 consumption heavily depends on imports,
with over 50% of demand for imported PVC resin and almost 100% of the
demand for Nylon-6 met through imports.
1.3 Export Duties
1.3.1 Steel-producing countries like China and Vietnam impose high export duties
on scrap steel of 40% and 15-17% respectively, making it difficult to procure
directly via imports.
Challenges Facing the Tool Industry 17 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
2 Labour Costs
2.1 While labour wages in India are lower than in China, restrictive labour laws
reduce flexibility and increase costs. Companies have to pay double the wage
rate for overtime, and overtime is restricted to 50 hours per quarter vs 1.25-
1.5 times as per international standards. Additionally, the total working hours
are limited to 9 hours per day and 48 hours per week, limiting operational
efficiency.
3 Logistics Costs
3.1 Transport to Ports: Punjab, a key hub for hand tool manufacturing, is
landlocked. Products have to be transported to ports like Mundra in Gujarat
for export, adding 1-1.5% to the cost of goods based on Freight on Board
(FOB) value.
4 Electricity Costs
4.1 High Electricity Rates: India’s power supply is unreliable due to frequent
power cuts, requiring maintenance of captive power generators that cost
almost INR 18 / unit as compared to INR 7-8 / unit for electricity procured
directly through electricity boards.
4.2 Solar Power Restrictions: States like Punjab limits solar power use to 90% of
overall electricity consumption due to net metering rules, limiting cost-saving
opportunities for manufacturers.
5 Financing Costs
5.1 High Interest Rates: India has a higher interest cost structure, with borrowing
costs being around 3% higher than in countries like China. The interest
subvention scheme provided to industries has been reduced from 5% to 3%
for MSMEs and has removed interest subvention for other exporters, further
increasing financing costs for manufacturers.
6 Machinery Costs
6.1 High-tech Machinery: Machines like CNC machines, essential for
manufacturing hand and power tools, are imported from China and incur a
7.5% import duty, along with a 10% surcharge. This adds to the overall cost of
manufacturing in India.
7 EPCG Scheme Barriers
7.1 The complex requirements for the Export Promotion Capital Goods (EPCG)
scheme, which offers duty drawbacks for machinery used in exports,
Challenges Facing the Tool Industry 18 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
8 Taxes
discourage small manufacturers and exporters from taking advantage of this
scheme.
“Average Export Obligation is risky and difficult to obtain. Requirements are difficult to
meet at times due to market fluctuations. High interest rates are required to be paid to
custom authority in case of failure to meet obligations”
- Hand tools Manufacturer in Punjab
8.1 Effective income tax rates in India are high as compared to other countries like
China and Vietnam. India has an effective tax rate of 34% vs 25% in China and
20% in Vietnam.
Figure 18: Effective income tax rates across India, China, and Vietnam (in percentage)
1.10.2 In addition, China offers 200% tax deduction on R&D expenses while India
has discontinued the practice. China also offers accelerated depreciation for
new fixed assets.
1.10.3 In Vietnam, 10% of profits can be appropriated to tax deductible R&D fund.
2-4 year tax exemption is also given in Vietnam for operating out of specific
industrial regions or location.
Technical Know-how
The tools market features many innovative products that are well-researched and developed by
manufacturers in other countries. However, Indian companies often lack the technical expertise
and advanced technologies needed to manufacture these products domestically.
For example, while India manufactures ratchet spanners, the ratchets themselves are imported
from China and then assembled with the spanner in India. These imported ratchets account for
Challenges Facing the Tool Industry 19 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
20-30% of the total value of the spanner. This reliance on foreign components not only inflates
the overall cost of production but also prevents Indian manufacturers to fully capitalize on the
value chain. Moreover, limited scale also limits the ability for manufacturers to focus on R&D.
A key factor contributing to this gap is the limited focus on R&D & reverse engineering within
the ecosystem. According to a hand tool manufacturer in Jalandhar, “Central Institute of Hand
Tools focusses on revenue generation from renting out machines and teaching. Efforts are not
focused on R&D.” Additionally, visa and import restrictions for Chinese nationals lead to delays
in technology transfers.
Limited availability of land for cluster expansion
Scaling production in India faces several barriers, particularly due to high costs of production
and limited availability of industrial land.
Land in Punjab is significantly more expensive compared to other states, with prices ranging
from INR 3-5 crores per acre. The lack of available industrial land near established manufacturing
hubs like Jalandhar and Ludhiana worsens this issue, making it harder for current factory owners
to expand or set up new factories. Additionally, India’s restrictions on ground coverage and
Floor Area Ratio (FAR) for buildings are stricter than international standards. For example, FAR
in Pune is 1.1, whereas it is 2.5-9.5 in Hong Kong. This reduces the effective land area available
for construction and the usable floor area, further increasing investment requirements for
the industry. These challenges limit the ability of manufacturers to scale up their operations
efficiently.
Challenges Facing the Tool Industry 20 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 10
Government Schemes are Limited
by Amounts and Applicability
The central and state governments offer various schemes to support manufacturers, but their
scope and impact are limited.
Central Government Schemes:
1. Remission of duties and taxes on exported products (RoDTEP): RoDTEP provides
rebates to exporters for taxes and duties on exported goods to help make Indian
exporters more competitive in international markets. Under this scheme, hand tools
exporters get rebates of 1.1% as a percentage of their FOB value, and power tools get
rebates of 0.9% as a percentage of their FOB value.
2. Duty drawbacks: Duty Free Import Authorisation (DFIA) allows duty-free import
of inputs but on a post export basis only. Inputs imported under this scheme are
exempted of the Basic Customs Duty only. To qualify, the inputs must be listed under
the Standard Input Output Norms (SION), and a minimum value addition of 20% must
be achieved. Under this scheme, manufacturers of hand and power tools are eligible
for duty drawbacks of 1.5% to 2% on their input costs, as per the Duty drawback
rates, 2023.
Punjab government schemes:
The Punjab government, under its Industrial and Business Development Policy 2022, has
identified hand tools as a key sector of focus and announced several schemes aimed at
supporting the MSME sector. These include:
1. Capital Subsidy: 50% subsidy on capital expenditure, with a ceiling of INR 50 lakhs
per unit.
2. Interest Subsidy: 8% interest subsidy for startups and 5% for MSMEs.
3. Freight Assistance: Up to 1% of FOB value for freight costs, aimed at offsetting
export logistics expenses.
4. Electricity duty exemption: Electricity duty is the duty levied and paid to the State
Government on the electricity supplied by Punjab State Power Corporation Limited
(PSPCL). Electricity duty is 100% exempted up to 7 years.
5. Stamp duty exemption: 100% exemption/reimbursement from stamp duty for
purchase or lease of land and building
We computed the estimated annualized benefit in five years for an average medium tools
manufacturer with an investment of INR 50 crores in plant and machinery, with INR 175 crores
revenue in Punjab. The full list of assumptions used for the computation is given in (Figure 19).
We found that even after availing all the benefits given by the state and including RoDTEP and
Government Schemes are Limited by Amounts and Applicability 21 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
duty drawbacks given by the central government, the total benefit aggregates to only 3.8%
of the revenue (Figure 20), as compared to disability of about 15%. In addition, most of these
schemes are limited to MSME manufacturers.
Moreover, as per industry in Punjab, even the existing schemes have not been implemented
due to fiscal constraints.
Assumptions
# Amount in 5th yr.
Investment in P&M 50 crores
Revenue 175 crores
Direct Jobs Generated ~900
Area in acres 6
Cost per acre 3 crores
Stamp duty % 6%
Interest exp 5 crores
Electricity cost 5 crores
CAGR 10%
Figure 19: Assumptions used for computation of estimated benefits from government provided subsidies and
incentives
Figure 20: Computation of subsidy/ incentives provided to a medium sized enterprise by the Punjab government
Government Schemes are Limited by Amounts and Applicability 22 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Maharashtra Government Schemes
The Maharashtra government has also provided multiple benefits under its three key industrial
policy schemes – Package Scheme of Incentives, 2016, Maharashtra Industrial Policy, 2019, and
Export Promotion Policy, 2023.
1. Power Subsidy: Maharashtra government provides a location-based tariff subsidy to
only underdeveloped and not-developed regions for eligible new units to the extent
of INR 0.5-1/- per unit consumed for 3 years from the date of commencement of
commercial production.
2. Interest Subsidy: Location-based interest subsidy at the rate of 5% per annum is
given in underdeveloped and not developed areas, with a maximum cap of the value
of electricity consumed and bills paid for that year.
3. Export Promotion: Exporting MSMEs are incentivized for the first 5 years on an
incremental increase in export turnover at the rate of 1% on incremental export
growth on a year-on-year basis.
A similar computation in Maharashtra (including central government’s RoDTEP and duty
drawback benefits) shows that the aggregate benefit is only 5.3% of the total revenue, still lower
than the total cost disability faced by Indian tools manufacturers (Figure 21).
Figure 21: Computation of subsidy/ incentives provided to a medium sized enterprise by Maharashtra government
Moreover, these schemes primarily cater to smaller MSEs or are limited by location or period.
Availing benefits of these schemes is often challenging due to lack of clarity, lengthy processes,
and delays in disbursements. Both the central and the state governments offer additional
subsidies, but they cater to specific purposes such as technology upgradation and design-
related subsidies only. To enable greater competitiveness and scale, policies to encourage scale
will be effective.
Government Schemes are Limited by Amounts and Applicability 23 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Chapter - 11
Key Policy Interventions
India’s tools industry holds immense export potential but is hindered by challenges in
infrastructure, high manufacturing costs, and inadequate scale. To unlock this potential, three
key interventions are essential:
1 Creating world-class clusters
2 Implementing structural reforms
3 Providing bridge support to overcome cost disabilities.
Create world scale and world class clusters for hand tools
To enable scaling and attract investments, India should establish world class clusters for the
hand tools sector. Drawing inspiration from PM MITRA Parks, which aim to transform the
textile and apparel industry, these clusters would integrate advanced infrastructure offering
state-of-the-art facilities, plug and play infrastructure, testing labouratories, design centres, and
housing for workers.
By 2035, four clusters spanning approximately 4,000 acres cumulatively should be established
for the hand tools industry, providing the necessary ecosystem for enhancing production
efficiency and attract investment.
These clusters should be located near existing centres of power and hand tools and can also be
located near automotive clusters.
Key features of world-class clusters
1. Plug and play infrastructure: Ready-to-use facilities that minimize setup time and
costs, allowing industries to operationalize quickly and ensure faster returns on
investment.
2. Worker housing: Affordable accommodations within clusters to improve workforce
productivity and support labour-intensive manufacturing.
3. Effluent treatment plant: Centralized facilities to ensure compliance with
environmental standards.
4. Convention centre: Platforms to facilitate industry collabouration and networking,
and the marketing of products.
5. Centre for research and development and testing facilities: Centres to promote
innovation, skill development, and quality assurance.
6. Reliable water and power supply: Access to unrestricted water and power supply to
reduce operational costs and boost profitability.
Key Policy Interventions 24 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Global best practices in cluster development
India can learn from successful international examples to create globally competitive clusters:
1. China provides plug and play clusters wherein building, electricity, waste treatment, all
facilities are provided, whereas, Vietnam has clusters with dedicated medium voltage
line, multiple centralized wastewater treatment systems. These examples show that
to build world class clusters, it is important to invest in infrastructure such as effluent
treatment plants, guaranteed 24x7 power supply, and plug and play factories.
2. Germany established a cluster with research facilities and identified research focus
in 2012, wherein 80% of cost on technology transfer from local research institutes is
reimbursed to SMEs. The cluster is funded through public funding and membership
fees and the team formed by members conduct marketing activities to make the
cluster more attractive for potential investors.
3. Vietnam has airport / seaport within ~40 km radius of a cluster. It has also developed
extensive national highways to connect clusters with Ho Chi Minh City, Mekong Delta,
and South-East region. These transformations have ensured 90% occupancy in the
developed clusters in Vietnam.
Investment requirements
The total cost of developing these clusters is estimated at INR 12,000 crores. The breakup of the
required investment is given in (Figure 22).
Requirement Size (Acres) Cost (INR Crores)
Land acquisition NA 4,000
Convention centre 50-60 125-175
Affluent treatment plant 20-30 125-175
R&D Centre 25-35 60-90
Factory Buildings & other
infrastructure
4,000 7,500
Total 4100 ~12000
Figure 22: Investment required for setting up world class industrial clusters
It is important to note that this investment can be recouped through leasing fees and operations
and maintenance (O&M) charges recovered from industry players.
Additionally, investment of INR 45,000 crores is required over the next decade from industry
players in the industrial park to achieve a target of $25 billion export sales.
Key Policy Interventions 25 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Public-private partnership (PPP) model
To ensure effective governance of the tools cluster, a PPP model is proposed with three key
components (Figure 23):
1. Special purpose vehicle (SPV): Responsible for planning, developing, and managing
the tools clusters.
2. Private developer: Infusing equity and managing infrastructural development
3. Cluster Authority (state government): Ensuring unencumbered land is made available
to the SPV, infusing equity along with a private developer, and bridging any viability
gaps in the development of the cluster.
Moreover, the central government will have to provide grants for the development of the cluster
and the proceeds collected from sub-leasing and operations and maintenance charges will be
shared between the private developer and the cluster authority.
Governance of Cluster
1. For efficient governance of clusters, it is important that the respective authorities’ roles
are clearly defined. To ensure this, the state government should enact regulations
for flexible laws including labour, building, factory and environment requirements in
specified clusters.
2. It should ensure that the region is planned by the defined cluster authority. SPV
should undertake the development of the cluster development, its maintenance,
investor outreach, and facilitate investment.
3. Cluster authority should be empowered to process approvals, and it should ensure
timebound clearance of projects and facilitate investment along with SPV.
Figure 23: PPP model for cluster development of hand tools
Key Policy Interventions 26 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Governance of R&D Centres
1. Research and development centres in the clusters should be governed by and
independent governing council.
2. The key role of the council should be to determine research areas for centre and
track performance of the industries and the cluster.
3. The governing council should also include industry players and associations,
export associations, government officials, and cluster authorities as members for
collaboration and providing expertise.
4. Chief executive officers of the industries operating in these clusters should then be
accountable to the governing council and not only to respective ministries.
Reduce Factor Market Disabilities Through Structural Reforms
Structural reforms are essential to ensure cost competitiveness for Indian manufacturers.
Key recommendations
1. Material costs: Policy measures should focus on rationalizing QCO restrictions and
import duties on steel products and PVC products related to exports. Additionally,
import processes should be eased for exporters and downstream sectors should be
supported through steel and PVC duty compensation.
2. Labour cost: Changes to current labour laws are required to reduce labour costs in
India such as allowing 300 quarterly overtime hours, increasing allowable working
hours to 10 hours per day and 60 hours per week, and by capping overtime wages to
1.25-1.5x rather than the current 2x, in line with international standards.
3. Land and Building: Since India restricts ground coverage and FAR of buildings as
compared to international benchmarks, policy needs to allow liberal FAR, ground
coverage, and green cover norms in line with international standards so that the
effective land area available for construction and floor area can be increased and
investment requirements by the industry could be lowered.
4. Machinery: EPCG requirements (especially requirements around average export
obligations) should be reviewed and simplified. Import duty on machinery should
be reduced. Penal provisions such as interest penalty should be reduced on non-
compliance with EPCG requirements.
5. High electricity cost: Reduce electricity costs by ensuring 24x7 electricity access to
manufacturers, especially in industrial clusters to reduce reliance on high-cost captive
power generators.
Key Policy Interventions 27 Factor market interventions would bridge the cost disability in the hand
and power tools sector
Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
6. Technology and Innovation: Visa clearance for foreign nationals (including China)
should be expedited to improve technology transfer process. This could improve the
efficiency and speed of technology transfer on import of machines.
According to FED analysis, if these factor market reforms are implemented, no additional fiscal
incentive will be required from the government. Figure 24 shows the effect of certain factor
market interventions on the bridge support requirement. For example, if import duty on key
raw materials is rationalized then it would reduce the cumulative estimated disability by INR
3,600 crores in hand tools. Similarly, rationalizing import duty on motors, plastic, and capital
goods would amount to reduction in disability of INR ~2,000 crores.
Figure 24: Cumulative deficit gap bridge through factor market interventions
However, if structural reforms are delayed, the government would be required to provide
support of approximately INR 8,000 crores over the next 5 years to compensate for the scale
and approximately 10% of the cost disability caused by structural factors in the hand tools
industry and 12% in the power tools industry. This is in addition to RoDTEP and Duty drawbacks
currently provided by the government.
Key Policy Interventions 28 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Figure 25: Bridge support requirement from the government for reducing cost disability in hand and power tools
market without factor market interventions
Support for cost disability in the hand tools market can be provided through capital and
operational subsidies
1. Logistics disability support (~INR 480 crores): 1% of FOB value of goods exported to be
paid out as logistics cost reimbursement.
2. Interest subvention (~INR 700 crores): Interest subvention to be increased back to 5%
under the Interest Equalization scheme by the central government.
3. Competitiveness incentive (~INR 650 crores): Provide competitiveness incentive support
of 3% of additional sales from manufacturing units at industrial parks to be established.
4. Capital subsidy (~INR 1700 crores): 5% subsidy to be provided on all machinery (including
testing equipment) that will be established in new industrial parks or procured by MSMEs.
Support for cost disability in the power tools market can be provided through capital and
operational subsidies
1. Interest subvention (~INR 1000 crores): Reinstate interest subvention to 5% under
the Interest Equalization scheme by the central government for all MSME and non-
MSME exporters.
2. Competitiveness incentive (~INR 3000 crores): Provide competitiveness incentive
support/ production linked or employment linked incentive amounting to 6% of
revenue from manufacturing units at industrial parks to be established.
3. Capital subsidy (~INR 500 crores): 15% subsidy to be provided on all machinery
(including testing equipment) that will be established in anchor investors.
If either the factor market reforms are implemented, or the government provides bridge support
Key Policy Interventions 29 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
requirement for both these industries then the cost curve in Figure 13 would readjust. The
new cost curve is represented in Figure 26. Structural readjustments would move the India
on a lower cost curve (indicated by the dashed line) and the lower structural cost curve will
contribute to improving scale. This would reduce the cost of production in India further in line
with China’s cost.
Figure 26: Readjusted cost curve after factor market interventions
Strategic Investment with Long-Term Gains
It is crucial to recognize that in case of no factor market reforms, the expenditure of the
government provided as bridge support should still be viewed as a strategic investment by the
government and not a subsidy.
For both Hand Tools and Power Tools:
1. The bridge support provided is projected to facilitate incremental exports worth INR
50,000 crore, having an income multiplier effect of 2-3 times.
2. With India’s tax-to-GDP ratio at 11.7%, this growth is estimated to generate additional
tax revenues of approximately INR 10-15,000 crores.
3. Hence, 2-3 times of bridge support provided will be collected from the industry as
taxes over the next 5 years.
These interventions can transform the tools sector into a global leader, driving economic growth
and job creation in the years to come.
Key Policy Interventions 30 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Key Policy Recommendations
and Conclusion
The report “Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector” sets forth a
comprehensive strategy to significantly boost India’s export performance in the Hand tools and
Power tools sector. The core recommendations, detailed throughout the document, focus on
the following key pillars:
1 Create World-Scale and World-Class Clusters for Hand Tools
1.1 Establish Clusters: Develop 3-4 hand tool clusters spanning approximately 4,000
acres by 2035, with one cluster in Punjab, to enhance production efficiency and
attract investment.
1.2 Key Features: Include plug-and-play infrastructure, worker housing, effluent
treatment plants, convention centers, R&D and testing facilities, and reliable water
and power supply.
1.3 Investment: Allocate INR 12,000 crores for cluster development, to be recouped
through leasing fees and O&M charges, with an additional INR 45,000 crores from
industry players over the next decade.
1.4 PPP Model: Implement a public-private partnership (PPP) model involving a Special
Purpose Vehicle (SPV), private developers, and a Cluster Authority (state government)
to manage development and governance.
1.5 Governance: Enact flexible regulations for labour, building, factory, and environmental
requirements; empower Cluster Authority for time-bound approvals; and establish
an independent governing council for R&D centers with industry and government
representation.
2 Reduce Factor Market Disabilities Through Structural Reforms:
To bridge the identified 14-17% cost disadvantage compared to China, the document urges
reforms across several areas:
2.1 Raw Materials: Rationalizing Quality Control Orders (QCOs) and reducing import
duties on inputs like steel, PVC, and motors.
2.2 Labour: Increasing flexibility in working hours and overtime regulations, aligning
wage norms closer to international standards.
2.3 Capital Goods & Exports: Simplify Export Promotion Capital Goods (EPCG)
requirements, reduce import duties on machinery, and lower penal provisions like
interest penalties.
2.4 Logistics, Power & Finance: Addressing transport costs, ensuring affordable and reliable
power, and tackling higher financing costs. Ensure 24/7 electricity access in industrial
clusters to reduce reliance on costly captive generators (INR 18/unit vs. INR 7-8/unit).
31 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
2.5 Land & Building: Liberalize Floor Area Ratio (FAR), ground coverage, and green cover
norms to align with international standards, increasing usable land area and reducing
investment costs to address land availability/cost.
2.6 Technology: Facilitating technology transfer through easier visa norms and import
processes and promoting domestic R&D.
3 Provide Bridge Support to Overcome Cost Disabilities in the event of delayed
Structural Reforms
3.1 No Additional Support Needed: If factor market reforms are implemented, existing
incentives (RoDTEP, duty drawbacks) suffice; no further fiscal support required.
3.2 Bridge Support Requirement: If reforms are not implemented, provide INR 5,800
crores over 5 years (beyond existing schemes) to offset 10-12% structural cost
disadvantages:
3.2.1 Hand Tools (INR 3,450 crores):
a. Logistics support: INR 450 crores (1% of FOB value as reimbursement).
b. Interest subvention: INR 700 crores (restore 5% under Interest Equalization
Scheme).
c. Competitiveness incentive: INR 700 crores (3% of additional sales from
industrial parks).
d. Capital subsidy: INR 1,600 crores (5% on machinery in new parks or for MSMEs).
3.2.2 Power Tools (INR 2,230 crores):
a. Interest subvention: INR 430 crores (restore 5% for all exporters).
b. Competitiveness incentive: INR 1,500 crores (6% of revenue from industrial
parks).
c. Capital subsidy: INR 300 crores (15% on machinery for anchor investors).
3.3 Strategic Investment: Treat bridge support as an investment, not a subsidy, yielding
2-3x returns in tax revenue (INR 10-15,000 crores from hand tools, INR 5-7,500 crores
from power tools) over 5 years due to export growth.
Strategic Outcome
These interventions aim to address India’s 14-17% cost disadvantage compared to China,
leveraging geopolitical opportunities (e.g., U.S. tariffs on China) and existing strengths (e.g.,
low-cost labor, hand tool ecosystem). The goal is to achieve a 25% global market share in hand
tools ($15 billion) and 10% in power tools ($12 billion) by 2035, creating 3.5 million jobs.
32 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Conclusion
India stands at a critical juncture, presented with a remarkable opportunity to transform its
hand and power tools industry into a global export powerhouse, targeting a potential worth
over $25 billion by 2035. As detailed in this report, while India possesses inherent strengths
like cost-effective labour and a growing manufacturing base, it faces significant hurdles –
primarily a structural cost disadvantage compared to competitors like China, inadequate scale,
infrastructure deficits, and gaps in technical capabilities. Overcoming these requires a concerted
and strategic effort.
These proposed interventions are synergistic with the Government of India’s ongoing push to
bolster domestic manufacturing and enhance global competitiveness. The overarching ‘Make in
India’ initiative sets the stage for developing indigenous capabilities. While specific Production
Linked Incentive (PLI) schemes demonstrate a successful model for incentivizing scale and value
addition, the principles driving them can be adapted to catalyze growth in the tools sector.
Furthermore, dedicated efforts like the RAMP (Raising and Accelerating MSME Performance)
scheme and the supportive, revised definition of MSMEs are vital steps aimed at strengthening
the Micro, Small, and Medium Enterprises that dominate the hand tools segment, providing
them with the necessary handholding to grow and compete globally. The recommendations
within this report seek to build upon and amplify the impact of these existing foundational
policies.
This report advocates a clear, actionable roadmap built on three pillars: developing world-
class, scaled industrial clusters with integrated infrastructure; implementing crucial factor
market reforms to enhance cost competitiveness across inputs, labour, logistics, and capital;
and providing targeted, conditional support as a strategic investment to bridge temporary
gaps. The path forward demands urgency and collaborative action from the central and state
governments, industry players, and financial institutions. Implementing the proposed cluster
development strategy, enacting structural reforms, and ensuring efficient delivery of support
mechanisms can collectively dismantle the barriers holding the sector back.
Seizing this $25+ billion opportunity is not merely about export figures; it is about generating
approximately 3.5 million jobs, fostering innovation, empowering countless MSMEs,
strengthening India’s industrial ecosystem, and solidifying the nation’s position as a reliable,
high-quality global manufacturing hub. The time to act is now; the potential rewards for India’s
economy and its people are immense.
33 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Appendix
A.1 Market Share by Player Globally
A. 1: Global market share of top hand tools and power tools manufacturers
Source: Press search, Industry reports, Annual reports of industry players
^ Assumed 20% of component business solution segment in Kyocera and 60% of TTI business relates to power tools
A.2 Tariff levied by US on China
A. 2: Additional tariffs levied by the US on China along with general tariff rate for India
34 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
A.3 Hand Tools Manufacturing process
A. 3: Process flow chart of manufacturing of hand tools
A.4 RoDTEP rates in India and export rebates in China
A. 4: RoDTEP rates in India and Export rebates offered in China
35
A.5 Top Exporters of Tool interchangeable for hand and machine tools
A. 5: Top exporters of Tool accessories of India - HSN Code - 8207
A.6 Industry players and vendors interviewed
Name Designation Company
Gautam Kapoor Managing Director Gardex International
Naresh Sharma Managing Director HR International
Suresh Sharma Managing Director HR Industries
Ajay Kumar Managing Director Ajay Industries
S.C. Ralhan President
Ludhiana Hand tools
Associaton
Ashish Kumar Director Victor Forgings
Ashwini Kumar President
Federation of Indian
Export Organizations
Arun Khattar Director - GSM Procurement Operations Stanley Black & Decker
Gopal
Balasubramanium
Vice President – Global Sourcing Stanley Black & Decker
Vish Puri President CSTech
Hashim Abdul Khadar Vice President SFO Technologies
Jaspreet Singh Assistant General Manager Ask Automotive
Dhiren Bammi Managing Director Groz Engineering
Prashant Bammi Executive Director - Operations Groz Engineering
Rahul Khanna General Manager - Sales Groz Engineering
Vikas Chetwani DGM-Product Management Groz Engineering
36
Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
A.7 Authors and Contributors
Shri Sanjeet Singh Program Director, NITI Aayog
Piyush Doshi
Operating Partner,
Foundation for Economic Development
Mohit Gupta
Program Lead,
Foundation for Economic Development
Pravin Kumar Specialist, NITI Aayog
Shubham Pandey Young Professional, NITI Aayog
Muskan Agarwal Young Professional, NITI Aayog
37
Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
References
i. Press Information Bureau
ii. Department of Heavy Industries
iii. Included in most power tools calculations, unless specified otherwise.
iv. Comtrade database; Report by Imarc Group
v. Checked revenues of the companies from their annual financial statements.
vi. Ibid.
vii. Comtrade database
viii. Harmonized Tariff Schedule of US (2024)
ix. Comtrade Database for 8201-8206, 8210 for hand tools and, 8467, 8468 for power tools.
x. Trade Vision data (2022-23) for HSN codes – 8201-8206, 8208, 8210, 842519, 842539, 842541,
842549
xi. Report by Ministry of MSME
xii. Report by UNIDO
xiii. Trade Vision database (2022-23) for power tools with HSN codes – 8467, 8468, 842511,
842531, 842542. HSN codes not included are 8207, 420291, 871620, and 901780
xiv. Press Report 1; Press report 2
xv. Bosch Website
xvi. Press report
xvii. Steel Mint report; Scrap register; Scrap Register India
xviii. PVC - Polymerupdate; Nylon 6 -Echemi; Nylon 6 - Plastermart
xix. BIS website covers HSN code 7214, 7224-7228 - BIS Website
xx. Media report by steel news
xxi. Media report by MRS Steel
xxii. Punjab Government Gazette
xxiii. Industry Interviews
xxiv. Industry Interviews
xxv. Punjab Government Gazette
xxvi. Press Report - The Hindu
xxvii. CBIC
xxviii. DGFT
xxix. Represents effective income tax rates (30% for companies with turnover>400 crores) after
surcharge (7-12%) and cess (4%).
xxx. PwC Report; PwC Report 2 , Press report
xxxi. Maharashtra Building Bye laws
xxxii. Government of HongKong
xxxiii. DGFT
xxxiv. Government of Punjab
xxxv. Press Information Bureau Website
xxxvi. Worker housing has not been incorporated in land requirements and investment required
calculations.
xxxvii. Ibid.
38 Unlocking $25+ Billion Exports: India’s Hand & Power Tools Sector
Acknowledgement
As part of the development of the “Unlocking $25+ Billion Exports : India’s Hand & Power Tools
Sector” Report, we had the benefits of invaluable inputs of a distinguished panel of experts
and stakeholders. Such stakeholder engagements were crucial in refining the methodology
and ensuring that the report reflects a well-rounded and comprehensive approach to evaluate
India’s export potential in the tools sector. It is with great pleasure that we take this opportunity
to extend our thanks to all the experts and stakeholders for their valuable inputs towards this
report.
In particular, I would like to place on record the invaluable contribution of Gautam Kapoor,
Director, Gardex International; Ashwini Kumar , President, Federation of Indian Export
Organizations; S.C. Ralhan, President, Ludhiana Hand tools Association; Suresh Sharma,
Managing Director, HR Industries; Naresh Sharma, Managing Director, HR International; Ajay
Kumar, Managing Director, Ajay Industries; Gopal Balasubramanium, Vice President, Global
Sourcing, Stanley Black & Decker; Vish Puri, President, CSTech; Dhiren Bammi, Managing
Director, Groz Engineering.
Also, I want to express my profound gratitude to Ashish Kumar, Director, Victor Forgings;
Arun Khattar, Director, GSM Procurement Operations, Stanley Black & Decker; Hashim Abdul
Khadar, Vice President, SFO Technologies; Jaspreet Singh, Assistant General Manager, Ask
Automotive; Prashant Bammi, Executive Director, Operations, Groz Engineering; Rahul Khanna,
General Manager, Sales, Groz Engineering; Vikas Chetwani, DGM, Product Management, Groz
Engineering.
Mr. Sanjeet Singh
Program Director, Economics and Finance II
NITI Aayog
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