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Engineering (Machine Tools) Industry in India - Industry Report
CYGNUS Business Consulting & Research, April 2005, Pages: 63
The Engineering industry plays a significant role in the development of other industrial sectors in the economy. This sector is very closely linked with the manufacturing and infrastructure sectors of the economy. Though the industry does not form a large segment of the engineering industry, it plays a very important role in its development and technology up-gradation. The quality and cost of engineering products depends on the quality of the parent machine tools and their automation levels. The development of machine tool industry is, therefore, of paramount importance for a competitive and self-reliant industrial structure.
This industry basically comprises of heavy and light engineering segments. This is further subcategorized into machinery/capital goods, equipments, and transport equipment in heavy engineering, castings, forgings to sophisticated process control equipment in the light engineering segment. Machine tools form a part of the capital goods segment.
Indian Engineering industry as a whole retains the top slot amongst all industrial segments, with a heavy contribution to the economy. In the year 2003-04, out of the total engineering production of US$22 billion, the heavy engineering market contributed over 80 percent and the rest has been taken up by the light engineering segment. In the year 2003-04, the Indian machine tool industry grew approximately into a US$353.50 million industry, which is a whopping 11.69 percent growth.
This industry has been constantly upgrading its technology base and diversifying its manufacturing range, on par with the global market requirements. It is also well-developed in terms of capability in producing plant and machinery for various manufacturing sectors, like steel, chemicals, fertilizers, cement, sugar etc. The recent development in its growth is a result of a cumulative process of technology assimilation and continuous absorption of process know-how for quite some time.
During the mid-nineties, the industry grew around 22 per cent. This shot in the arm was infused by the massive foreign investment flood into the domestic automobile sector. Today, with a majority of global automobile Original Equipment Manufacturers looking towards India, a cost effective production destination, the Indian machine tools and auto-ancillary firms are expecting a surge in their operations. Growth based alliances are looming large on the horizon of the Indian machine tools industry, as it would be mutually beneficial to both domestic and foreign partners.
Quality mantra is in the air
In the wake of globalization, Indian Engineering community is promoting and relying on quality. Many of them are pursuing a systematic approach to quality control and standardization so as to dovetail a position in the ever competitive global market place. Today, more than 2,500 firms from the Indian engineering sector have already acquired the ISO 9000 accreditation in diversified areas such as casting and forging, automobile parts, machine tools, electrical machinery, primary iron and steel products, industrial machinery, IC engines, pumps, textile machinery, etc. to name a few. Simultaneously, Indian exporters are embracing eco-friendly production processes, in an effort to enlist themselves in the elite league of global companies, from the developed world, which adhere to certain global environmental standards.
Landscape of Indian Machine tools industry India is the 18th largest producer of Machine tools in the world. The Indian machine tool industry currently consists of about 450 manufacturing units of which approximately 33 percent (150 units) fall under the organized category. Further exploration reveals that ten major Indian companies constitute almost 70 percent of the total production. Approximately 75 percent of the Indian machine tool producers have received the coveted ISO certification. The Hindustan Machine Tools Limited (HMT) which is a government-run company, alone produces nearly 32 percent market-share of the machine tools manufactured in India. The recent active participation of some U.S. companies and the U.S. Association for Manufacturing Technology (AMT) in the Indian market, throws light on the shifting-focus of these International companies. However, India faces a stiff competition from companies in Germany, U.K., Spain, Taiwan, Korea, China, and Japan, who are aggressively promoting their products. According to The Indian Machine Tool Manufacturing Association (IMTMA), U.S.A enjoys a 15-18 percent market share, in
India's total imports, of machine tools and accessories.
Off late, a majority of the Indian engineering companies namely, ABB, BHEL, Cummins, Crompton Greaves, Elgi equipments, HMT, Kirloskar Oil Engines Ltd (KOEL), L&T, Siemens and Thermax, are faring well. This has been particularly seen in the FY’04, when most of them have achieved a healthy revenue growth under pressurized margins. However the raw material costs becomes the lone gray cloud, which may pose a hindrance to the players in the coming period.
But with the Indian government extending all support, in promoting exports and increasing Foreign Direct Investment limits in sundry engineering sectors, including Machine Tools, the Indian machinery products with its high quality and cost competitiveness are likely to work wonders for the Indian engineering industry.
Further, the increasing level of disposable incomes of the Indian population promises to enhance a continuous growth in the economy. Indian GDP is expected to grow consistently around six percent along with industrial growth which is expected to be 5.2 percent. One of the major end-user industries, automobile sector, is predicted to grow around 15 percent during the next two years. Riding on the good growth of all these underlying factors, the Indian Machine Tools industry is expected to grow at a CAGR of nine percent in the coming months.
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