From Capacity Creation to Capability Creation: The Next Phase of India’s Manufacturing Journey

by Manish Mathur, CEO-Cranes, Action Construction Equipment

India’s manufacturing sector is emerging as a defining engine of the country’s next phase of growth. Much of the past decade has seen that ambition channelled into Make in India that includes building production capacity, attracting investment and integrating the country into global manufacturing networks. That foundation is critical and has borne tangible results with manufacturing GVA (Gross Value Added) up 7.72% in the first quarter and 9.13% in the second quarter of FY2025-26 and industrial production up 8.1% in December 2025, the fastest in more than two years. The next phase of this journey calls for a deeper ambition. India needs to build greater ownership of the technology, design and engineering that goes into the products it manufactures. Capacity creates scale; capability creates competitiveness. As tariff structures evolve and global supply chains reconfigure, the ability to design, innovate and engineer products in India will become increasingly important.

This marks an evolution of Make in India towards an ecosystem that can Engineer, Innovate and Scale in India. Manufacturing competitiveness will increasingly be determined by the depth of product development, R&D and intellectual property within the ecosystem. The progress is already visible. This transformation is already evident with medium and high technology industries accounting for 46.3% of India’s manufacturing value added. India’s position in Competitive Industrial Performance has improved to 37th in 2023 from 40th in 2022.

Infrastructure as the Foundation of Industrial Capability
One of the strongest enablers of this transition is India’s sustained infrastructure push. Roads, railways, ports, industrial corridors and logistics networks are creating the industrial ecosystem that competitive manufacturing requires. Public capital expenditure has expanded roughly 4.2 times since FY18, rising from ₹2.63 lakh crore to a proposed ₹12.2 lakh crore in the Union Budget for FY2026-27, while the National Infrastructure Pipeline envisages investment of over ₹111 lakh crore across energy, transport, urban development and logistics.

This spending creates a powerful multiplier effect. Every highway, metro corridor and industrial park generates demand for steel and cement as well as the machinery required to build them. Capital goods therefore become an important transmission channel through which infrastructure investment drives wider industrial activity. The National Manufacturing Mission reinforces this direction through its focus on technology, skills, MSMEs, quality and domestic value addition.

Construction Equipment: Building More Than Machines
The construction equipment industry sits at the intersection of these two transformations, infrastructure creation and advanced manufacturing. India is already the world’s third largest market for construction equipment, and the ongoing infrastructure expansion is creating a large, sustained domestic market for excavators, cranes, loaders and material-handling systems. Government backed schemes such as the Scheme for Enhancement of Construction and Infrastructure Equipment are designed to deepen domestic manufacturing of high value machinery, from tunnel boring systems to advanced hydraulics, rather than simply importing it.

As highways, metros and freight corridors multiply under the Viksit Bharat 2047 vision, the industry is being asked to supply intelligence, connected, telematics enabled equipment that improves productivity, safety and lifecycle performance on the jobsite, an evolution that domestic manufacturers and their engineering teams are central to enabling. This is already gaining momentum. The industry has built a broad manufacturing ecosystem spanning OEMs and component manufacturers, with the Indian Construction Equipment Manufacturers’ Association representing around 95% of that base. The next opportunity is to deepen this ecosystem, developing critical technologies from advanced hydraulics and engines to electronics and alternative powertrains, so the goal is not simply to assemble more machines in India, but to develop more of the engineering behind them here.

This shift is also drawing global capital into the sector. With no industrial licensing requirement and 100% FDI permitted under the automatic route for capital goods, India can attract manufacturers looking to serve both domestic demand and international markets. For an industry that contributes roughly a quarter of overall project cost on infrastructure builds, encouraging this investment is a direct lever on delivery speed.

Stronger collaboration between OEMs, component manufacturers, technology providers and research institutions can help create deeper domestic capabilities and reduce dependence on importing critical technologies across hydraulics, engines, electronics, automation, telematics and alternative powertrains. This will drive greater investment in R&D, product localisation and digital engineering. This capability-building must extend beyond large OEMs to MSMEs, already 35.4% of manufacturing output and 48.58% of exports, as component suppliers integrate further into these value chains.

The Real Measure of Manufacturing Progress
India’s manufacturing story is entering a more demanding phase. The first objective was to create factories, attract investment and build production scale. The next phase is to ensure that more of the value, technology and intellectual property embedded in those products originates in India. Capacity remains fundamental. India will need more factories and greater output to meet rising domestic and global demand. The opportunity now is to ensure that this expanding capacity is accompanied by deeper technological capability. Global manufacturers diversify supply chains and reward partners who can co-design, not just co-produce.

The transition from capacity to capability is therefore not a departure from Make in India. It is its next evolution. Capacity creates scale. Capability strengthens competitiveness. Technology ownership can turn that competitiveness into lasting industrial leadership. As India moves towards its 2047 ambitions, the measure of manufacturing success will increasingly lie in the products India designs, the technologies it develops, the intellectual property it owns and the solutions it exports to the world.