Abstract: This study examines some major issues regarding competitiveness in one of the medium-high technology industries namely non-electrical machinery industry. Besides a review of the evolution and structure of the industry, the growth performance of the component industries is examined at the three-digit ASI level. A detailed analysis of exports as well as imports at the four-digit ITC classification is undertaken to examine the impact of liberalisation on specific machinery categories. The study indicates the inward orientation of the industry. Low tariffs and liberal imports including imports of second hand machinery have affected some industries like textile machinery and machine tools. The study considers two specific issues that are important for establishing export competitiveness namely developing technological capability and FDI in the industry. A case study of machine tool industry is incorporated for a better understanding of these issues. The report concludes with suggestions for strengthening competitiveness in the industry.