Glossary term
Capital Goods Industry: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
The capital goods industry consists of industries that produce machines, machine tools and equipment used to make other goods, rather than goods for direct consumption. It is the foundation of industrial growth, since a country that can make its own machines can expand every other industry without relying on imports.
In more detail
At independence, India had textile and jute mills and a few steel plants but almost no capital goods industry, so it had to import machines. The Second Plan, based on the Mahalanobis model, gave priority to heavy industry for this reason. Building this base took years but reduced dependence on imported equipment.
Example
A factory that manufactures lathes and textile machines belongs to the capital goods industry; the mill that uses them to make cloth does not.
Key points
- Produces machines used to make other goods.
- Absent in colonial India.
- Emphasised in the Second Five Year Plan.
Common mistake
Treating all manufacturing as capital goods production.
Related terms
DeindustrialisationImport substitution
Where it is explained
This term is explained in Class 11 Indian Economic Development Chapter 1: Indian Economy on the Eve of Independence.