Why this is important to Wisconsin businesses: Opportunities for Wisconsin companies to contribute to the growth of India's machine tool industry
The machine tool industry is an integral part of India’s manufacturing sector, providing the machinery that delivers manufacturing output and drives productivity and growth.
Growth in the manufacturing sector has led to a rapid increase in demand for machine tools. As a result, India is set to become a key player in the global machine tool industry, and is likely to see growth in high-end machine tool manufacturing. The machine tool industry is crucial to the success of various manufacturing segments such as automobiles, defense, railways, plastics, electronics and white goods. It will have a huge role to play in the Modi Government’s flagship program, “Make in India.”
The machine tool market in India is highly fragmented, with the presence of several small, medium and large suppliers including international and regional players. These companies compete on the basis of product differentiation, service portfolio and pricing. The intense competition among vendors has resulted in increased investment in R&D and the implementation of high-tech solutions.
The Indian machine tool industry comprises around 200 machine tool manufacturers in the organized sector and around 400 in the small ancillary sector. Large players comprise about 25 percent, with the remaining 75 percent is dominated by small manufacturers.
One of the major drivers for this market is Indian government policies that provide impetus to the machine tool industry. Currently, 100 percent foreign direct investment (FDI) is permitted to the machine tool industry in India. In 2014, an excise duty of 10 percent was imposed on machine tools. The government has exempted machine tool manufacturers from being required to obtain an industrial license for developing tools. The “Make in India” campaign, coupled with manufacturing growth, are driving demand in the machine tool industry.
The auto component market, which is one of the prominent users of machine tools, accounts for about 40 percent of machine tools consumption in India. India is the automotive export hub in the South Asian market for companies like Ford, Isuzu, Suzuki, Honda, BMW, Mercedes-Benz and Fiat.
While imports have risen to meet the demand for machine tools, local capacity in machine tools needs to be built to cater to long term growth. User segments such as automobiles, auto components and consumer goods are the key drivers for the demand.
Several states in India are seeking to attract investments in this industry. A few states, such as Tamil Nadu, Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Haryana and Punjab, have managed to attract sizable investments. Interestingly, these states are key industrial hubs as well. Companies that want to succeed in the sector in the long term should focus on developing capacity and scale, design capability, acquiring the latest technology, and managing costs through productivity improvement. Machine tool manufacturers should focus on the needs of these segments and look at developing customized products. In addition, emphasis on R&D and innovation is required to maintain technological parity with global players and remain competitive.
All these factors present opportunities where Wisconsin machine tool manufacturers can look to invest. Notably, many international firms have entered the Indian machine tools sector or announced plans for joint ventures or wholly owned subsidiaries in India.