India sets sail to become a global shipbuilding power

The Budget 2025-26 has set the stage for a major transformation in India’s shipbuilding sector, aiming to make the country a global player. By addressing cost disadvantages and opening new growth opportunities, these initiatives are targeted towards boosting shipbuilding, creating jobs, and reviving India’s maritime industry.

India’s shipping sector heavily depends on foreign owned vessels, with only 8 per cent of cargo carried by Indian flagged ships. The fleet is ageing, and high manufacturing costs make commercial shipbuilding costly. To address these challenges, the government has announced key policy reforms in the Budget under a revamped Shipbuilding Financial Assistance Policy.

One major reform is the introduction of Credit Notes for shipbreaking in the Indian yards to encourage sustainable ship recycling and create demand for new ships. To further support the sector, the government is developing Shipbuilding Clusters. These hubs will bring together infrastructure, skilled workers, and new technologies, enabling India to scale up production and expand into building different types of ships.

The Budget has also extended the basic customs duty exemption on shipbuilding inputs for an additional 10 years. This will lower the input costs for the sector.

Another key decision is the inclusion of large ships in the Infrastructure Harmonized Master List. This policy will be game changer, allowing access to long-term financing and attracting private investment into the industry.

Additionally, the Rs. 25,000crore Maritime Development Fund, backed by government and private investors, will expand financing options for the sector. All these measures will not only enhance the overall shipbuilding ecosystem but also trigger the revival of the private shipbuilding industry in India.

With policy support now in place, the coastal States must make efforts to capitalise on these opportunities. The Economic Survey 202425 has emphasised the need for state led initiatives to address fundamental challenges in doing business (EoDB 2.0).

STATE REFORMS

Over the past decade, the Centre has introduced key reforms, simplifying taxation laws, streamlining labour regulations, and decriminalising business laws. Building on these efforts, coastal State governments must take proactive steps to enhance further the ease of doing business through deregulation.

Establishing single window clearance systems, fast-track approvals, better shipyard connectivity, flexible labour hiring policies and speedy land allocation systems will boost investor confidence.

Setting up state level shipbuilding investment boards and collaborations with global leaders like South Korea and Japan will help attract investments in greenfield shipyards for enabling efficient production of world-class ships. Notably, Gujarat and Andhra Pradesh have already made significant strides in this direction, positioning themselves as leading destinations for shipbuilding investments.

Complementing the measures taken by the Union and the State governments, the shipyards should focus on aligning their productivity with global standards. As highlighted in the Economic Survey 202425, India’s business enterprises contribute significantly less to the overall R&D expenditure in the country, than their global counterparts.

This gap is evident in the shipbuilding sector as well, where shipyards and firms in the ancillary industry must substantially increase their investment.

Complementing the measures taken by the Union and the State governments, the shipyards should focus on aligning their productivity with global standards in R&D across all levels of the value chain, viz., marine equipment, ship design, production technologies, and terminal facilities.

R&D THRUST

Prioritising R&D in core ship technologies such as high capacity marine engines, gas turbines, shafting, gearboxes, propellers, intelligent monitoring systems and cargo handling systems, will reduce import dependence and improve cost and time efficiency. Shipyards should also invest in R&D for producing carbon efficient ship design across conventional and future vessels, including energy and goods carriers, cruise ships, deep sea exploration platforms and inland ships.

Shipbuilding combines capital and labour-intensive processes, requiring both technological investments and a skilled workforce. The Centre has been making continuous efforts to improve the country’s skilling landscape.

Building on the skill development initiatives taken in the July 2024 Budget, this Budget has announced the setting up of the National Centres of Excellence for Skilling with global partnerships. The shipbuilding industry should leverage these centres, alongside institutions such as the Centre for Excellence in Maritime and Shipbuilding, to ensure a steady supply of skilled workers.

Collaborations with leading shipbuilding nations for joint educational programmes, modernising naval architecture curriculum in universities, and introducing specialised courses such as shipbuilding robotics and modular ship construction will address industry needs.

Moreover, school level ship model making contests, college level ship design competitions, and tailored ITI courses will spark early interest and inspire young talent to pursue shipbuilding.

There is also a need to invest in technology to make blue collar shipbuilding jobs of technicians and other skilled labourers more lucrative. These combined efforts in education, skill development and technology advancement will cultivate a new generation of skilled shipbuilders, driving India’s shipbuilding sector forward.

As highlighted in the Economic Survey 202223, shipbuilding will be a key driver for achieving India’s Viksit Bharat @2047 aspirations due to the sector’s high employment and investment multipliers and strong reliance on MSMEs.

Beyond driving economic growth, building an indigenous fleet will be crucial for ensuring national economic sovereignty and strengthening maritime security.

The Budget marks a significant step in this direction by setting India on course to becoming a leading shipbuilding nation.