The Indian machine tool industry, the mother industry for the entire manufacturing sector, is recovering from a slump seen in the past three years.
With the recent ‘Make in India’ initiative announced by the Prime Minister Narendra Modi government, there will be increased competition in the machine tool, and as well as, manufacturing industry to attract more business.
In such a scenario, manufacturing and utilising innovative machines is the only way that one can stay ahead in the competition, say leading machine tool manufacturers.
Deccan Herald spoke to varied players at the Imtex Forming and Tooltech 2016 in Bengaluru, to understand the nuance of the industry.
Ace Designers Managing Director Shrinivas G Shirgurkar said, “The machine tool industry is the mother industry to all other industries. Any industry requires components, then they have to be produced using machine tools to the shape and dimension from raw materials. Hence, any growth in any industry leads to the use and demand for machine tools.”
Shirgurkar added, “As investment happens in auto, auto components industry, defence production and infrastructure development will lead to creation of manufacturing capacity and demand for machine tools.” On challenges, the industry says, right now, it is facing the challenges of demand . From the past three years, the business has been coming down. Hopefully, the demand will improve in the coming years.
“Of course, it is a cycle; the peak was in 2011-12. Since, we are large scale manufacturers, we are quite dependent on variations and demand factor. The capacities are there, but fulfilling them is reduced. Though there are many initiatives the government has taken, on ground level, nothing has happened,” an industrialist rued.
“Agreed,” Yuken India Managing Director C P Rangachar, said. “Many of the reforms that were on the anvil have not come on the ground level. Manufacturing has to lead GDP growth, and for manufacturing to grow, the machine tool industry has to grow,” he added.
Even though the size of the industry is not big, the impact it has on the economy is huge. There is large demand for development of basic infrastructure, power, railways, defence, housing, transport, mining, offset business, and aerospace.
The Budget is not going to make much difference. However, GST (Goods and Services Tax) will ultimately reduce the cost of acquisition of capital goods, which will create demand. GST is the biggest hope among machine tool players.
Shirgurkar reiterated that since the capacities are built in various places, unless there is increase in overall capacity utilisation, the demand will not increase. Smaller industries have not invested in the last 2-3 years. About 50-60 per cent of machine tools are bought by these small-scale industries depending on different products. Machining centres are bought by corporates. However, CNC lathes are bought by smaller industries, which are very sensitive to the market dynamics.
The ‘Make in India’ initiative has ushered in positive sentiments, and hopefully, more business is expected in the coming two years. The industry is currently expecting 10-15 per cent growth per annum, recovering from a 40 per cent collapse in 2012. Industry players reiterate that Germany and Japan are still strong in manufacturing, because they are ably supported by strong machine tool industries.
The United Kingdom, for instance, was a pioneer in manufacturing machine tools, 30 years ago, but has since, lost its manufacturing competitiveness. There is no manufacturing left there, owing to machine tool production being ceased. They are entirely services driven. Similarly, countries which have stopped machine tool manufacturing, will also lose their manufacturing competitiveness sooner or later. When asked about the forecast for the next three years, Rangachar said, “I am born optimistic. But, having had three bad years, I do think the end of the tunnel should not be very far away. If things like GST, land reforms, labour reforms and making India investment-friendly can be a game changer.”
Many manufacturing firms are introducing numerous innovations for the development of the metal forming segment. Companies in India are offering hydraulic and mechanical presses with servo drive options (hydraulic or electric).
Immense development is taking place in the area of automation of machine tools, using robots, gantry loading and unloading systems to run unmanned machines and realise better productivity. Another trend is to complete machining in one setup to ensure accuracy, and lower leadtime to produce. Multi-tasking machines, 5-axis machines, special equipment for aerospace, defence, power and heavy engineering industries are the new developments.
Size of the machine tool industry
Last financial year, the machine tool industry’s production was pegged at Rs 4,300 crore. In the current year, as of first half year, the growth has been flat. The next financial year is expected to see a growth possibility of 10-15 per cent. The production of metal forming machines touched Rs 462 crore during 2014-15, while the metal forming machine consumption in India during 2014-15 touched Rs 1,369 crore. The machine tool export is between 5-7 per cent of production, and domestic consumption is around 90-95 per cent.
According to former IMTMA President Shailesh R Sheth, “There are several key initiatives under the ‘Make in India’ campaign, like encouraging FDI, Defence Offset Policy, high Budgetary allocations for infrastructure, particularly roads, solar energy and railways. All these would demand investment in creating productive capacity. Here is where machine tools will feel a direct impact. The challenge for the industry is to be able to offer the right type of machines that the said sectors require.
The sectors that ‘Make in India’ will directly impact are relatively new, sunrise segments like defence, aerospace, and precision engineering. The Indian machine tool industry has not developed such machines so far, as it was economically not viable. So, initially, the benefit may go more for foreign suppliers. But in time to come, this situation will get rectified as machine tool makers will come forward to seize the opportunity. “We have to recognise that not everyone can afford to import. Particularly tier II and III of the value chain, the MSMEs of the country, will look more to buy from India. So, if Indian makers develop products specifically for these sectors and target MSME segments, it could prove to be a huge opportunity,” Sheth said.
Overall, the technology development seems to have plateaued somewhat. One does not see highly disruptive or game changing developments hitting the market anytime soon. However, there are many incremental step-up technologies doing the rounds such as 3D printing, additive manufacturing, free form fabrication, and thixoforming, just to name a few. Thus, this is the right time for the industry to engage heavily in R&D. There is lot of space and hunger for breakthrough developments. “The machine tool industry’s R&D spend is woefully inadequate, despite plenty of incentives going around. The industry is content to be in its comfort zone. It needs to wake up and seize this opportunity, and the first step is to invest in R&D,” Sheth reiterates.
Major policies
The IMTMA was able to achieve three major policy initiatives for the machine tool industry in the last financial year. The first is the creation of an Advanced Centre of Excellence for R&D and Technology Development with IIT-Madras.
The second is the creation of a fund under the Technology Acquisition Fund Programme, in order to help the capital goods industry to acquire and assimilate specific technologies for achieving global standards and competitiveness, in a short span of time.
The third is the establishment of integrated industrial infrastructure facilities for machine tool industry, with a basic objective of making the machine tool sector more competitive by providing an ecosystem for production. Establishment of a machine tool park (500-acre facility at Tumakuru, Karnataka), will be a step forward in making the sector cost-effective, produce hi-tech machine tools, enhanced export capability and attract more investment.
If the said three measures of the industry and government were to materialise, it would enable to catapult the Indian machine tool industry to become a dominant player in the home market by 2025, from the current market share of around 40 per cent.
Many reforms initiated over the past year, such as gradual reduction in corporate tax and putting on hold the provisions of the General Anti-Avoidance Rules (GAAR) have reduced uncertainties and ushered in positive sentiments to pave way for manufacturing growth. We expect the demand for metal forming machine tools to grow at a healthy rate in the medium to long-term.
P G Jadeja, IMTMA President
IMTMA Export Development Cell has been constituted with members from machine tool OEMs and accessory manufacturers with the objective of boosting the export efforts of the machine tool industry and thus enhances the ‘Brand India’ image in overseas markets.
V Anbu, IMTMA Director General
Global ranking
India ranks 14th in production and 10th in consumption of machine tools, according to the World Machine Tool Output and Consumption Survey by Gardner and Research. The demand is likely to grow by 15% year-on-year, and may reach about $3 billion by the year 2020.
Machine tools in India (Rupees in crore)
Year Production Import Consumption % Share*
2010 - ‘11 3,623 6,703 10,191 36 %
2011 - ‘12 4,299 7,645 11,764 37 %
2012 - ‘13 3,885 7598 11,269 33 %
2013 - ‘14 3,481 4,672 7,906 44 %
2014 - ‘15 4,230 5,318 9,267 46 %
2014 - ‘15+ 2,075 2,482 4,421 47 %
2015 - ‘16+ 2,179 2,681 4,717 46 %
*Indigenous manufacturers in total Indian consumption; +First half