While it was earlier dependent mainly on the automotive sector, the Indian machine tool industry is now catering to the rising demand from other segments such as defence, aviation, health care, etc., so that future growth seems assured

The economic downswing in India in the recent past may have affected many a sector, but not the machine tool industry. This is not just a sign of resilience but also of the fact that this industry has consolidated itself to such an extent that growth seems to be assured. And here, what better proof can there be than the available data? Bucking the usual earlier trend of being the first to get affected by any slowdown and the last to recover, organised players of the machine tool industry won orders worth Rs 2,511 crore during the first six months of 2010-11, showing a year-on-year growth of 18 per cent. This followed 19 per cent growth in order booking for the full year ended March 2011, which stood at Rs 4,977 crore. "The present demand for the machine tools industry is worth around Rs 10,000 crore and the Indian Machine Tools Manufacturers Association (IMTMA) is projecting 30 per cent growth in total demand," predicts IMTMA's senior advisor P J Mohan Ram.

In terms of the industry's development, the IMTMA recently signed a MoU with the Government of Karnataka for the establishment of a Machine Tool Industry Park for the southern region near Tumkur. The park will co-locate machine tool producing companies, along with the supply chain units, as well as service providers to the industry. "This is expected to bring synergic benefits to the units and encourage overall growth of the industry to meet the anticipated demand for machine tools in the future," says IMTMA's past president C P Rangachar. Meanwhile, even as the industry is now taking steps to establish a significant presence in India and match the benchmarks laid by the developed countries, product development has also been a major contributor.

Earlier this year, for instance, Premier Ltd, a pioneer in the Indian machine tool industry, displayed two newly upgraded versions of their popular models, the PHA 250, a CNC gear hobbing machine and the PVM40, a vertical machining centre. "Both the machines reflect the latest technologies, developed in-house. The PHA 250, one of the fastest moving models of its kind, has been designed specifically for the auto component and engineering industry, technologically suitable for a job shop and completely controlled through software. The newly designed PVM 40 is cost-effective and suitable for tool room, automobile component and engineering industries. Its advanced technology makes it one of the most superior models available in the current Indian market, suitable for die mould application," points out D Mulherkar, Vice President-Machine Tools, Premier Ltd.

So what is it that is pushing the graph of the Indian machine tool industry higher? According to a report published by IndiaMart, the SMEs in this sector are driving the wheels of this growth chariot. "Over the years, the machine tool industry has acted as a platform for various entrant SMEs that wanted to prove their mettle at a global level. Reports claim that the Indian machine tool SMEs are among the most sought after vendors by the local manufacturers and also successfully attracting the attention of global companies as well. The European and Asian markets offer new business opportunities for the SMEs in the sector. As the demand for 'Made in India' brand of machines in prominent machine tool consuming nations (Italy, Germany, Brazil, US and Middle East) is consistently rising, it will surely benefit the SMEs as they play a crucial role in fulfilling the demand," writes Songbedna Bauri.

Further, as per a report circulated by India PR Wire, the Indian machine tools industry is expected to see a consolidation process as an increasing number of foreign players are entering the domestic market to set up base here. According to P G Jadeja, Chairman & MD, Jyoti CNC Automation (P) Ltd, "At this juncture the Indian machine tools industry has to not only consolidate but should also need to focus on improving business and manufacturing processes. Today, a major pie of the local machine tool consumption is dominated by foreign imports because we lack a competitive product basket." In 2011-12, the consumption of machine tools by the end user industry was to the tune of Rs 11,700 crore of which imports constituted Rs 4,300 crore as the country stands 12th in production and 7th in the consumption of machine tools in the world.

The Indian machine tool segment has around 1,000 manufacturing units of which around 20 are in the large-scale sector accounting for 70 per cent of the turnover and the rest are in the SME sector of the industry, which gives a fair indication about the need for consolidation. "The presence of a large number of foreign players in the Asian machine tools exhibition, AMTEX 2012, was a clear testimony of the rising overseas interest in the Indian machine tools sector," says Cyril Pereira, managing director of Triune Exhibitors and organisers of the event. This year, AMTEX 2012 saw representation from 16 countries, including Germany, Italy, Switzerland, Chezkslovakia, USA, Sweden, Belgium, Spain, Israel, Turkey, Japan, China, Korea, Malaysia, Sri Lanka and Singapore, including exclusive pavilions from China, Taiwan and Korea.

Historically, the machine tool industry was dependent on the automobile and auto components sector for a majority of its business. But, diversification into emerging areas like aerospace, defence, space, power, railways and heavy engineering has given a new lease of life to the sector. Many companies are expanding capacity to cater to the growing orders. The Ministry of Defence alone is expected to place orders worth Rs 5,000 crore for machine tools during the next fiscal year. Indian Railways is likely to spend Rs 1,200 crore on machine tools next year. According to Rangachar, who is also the managing director of Bangalore-based hydraulics equipment major Yuken India, "Order booking is fairly good at a 20-30 per cent increase over last year."

Pointing out the fact that the industry is looking at a compounded annual growth rate (CAGR) of 15 per cent during the 12th Five Year Plan period, IMTMA's president Vikram Sirur was recently quoted as saying that there is a need to create new capacities and that requires high technology. "Indian machine tool makers presently lack technology to improve their product portfolio. To get technology we need to tie up with overseas companies. So, we have asked the government to set up a technology fund with a corpus of Rs 1,000 crore to help companies enter into joint venture arrangements with overseas companies," he said. The path is clear and some of the emerging machine tool SMEs are already proving their mettle on a worldwide level. This includes Geeta Machine Tools (P) Ltd, Gujarat-based manufacturer and exporter of boring and milling machines, radial drilling machines, that has the second-largest in-house infrastructure and Punjab-based Jaswinder Machine Tools that recently bagged the recognition of making timely delivery of bulk orders in India.

The Indian machine tools industry is primarily engaged in manufacturing a complete range of metal-cutting and metal-forming machine tools. Although these products are customised in nature, the Indian portfolio consists of conventional machine tools and also computer numerically controlled (CNC) machines. "There are different variants provided by the Indian manufacturers consisting of special purpose machines, robotics, handling systems and TPM-friendly machines. Many SMEs are focusing on upgrading production systems along with the fast adoption of technology to tap opportunity in this burgeoning market. In recent times, a majority of the SMEs are entering the CNC segment due to its high profitability. They are also offering further value-additions at lower costs with the aim of solving the issue of specific user needs. In regard to the present trends, it is believed that the CNC segment could become the growth driver for the machine tool industry in India," the IndiaMart report states.

Also, given the government's Automotive Mission Plan 2006-16, which envisages India to become a global hub for design and manufacture of automobiles, analysts are of the opinion that it is time for India to raise the production capacity at a CAGR of 25 per cent as the domestic automotive sector will raise output to 10 million cars, 30 million two-wheelers and 2.2-million commercial vehicles by 2020. It also means that the auto component manufacturers would feel the need for USD 2 billion investment every year. The Indian machine tool manufacturers would be required to strengthen capacity by 7-8 times to fulfill this burgeoning demand.

So what is it that will act as the trigger for rapid growth? According to industry experts, it is innovation that will boost further momentum. "The SMEs in this sector are fast realising the significance of consistent innovation with the adoption of modern business strategies. The promoters of SME manufacturing units are taking help of mass production techniques to increase turnover. The feeling is that the growth target is achievable with considerable improvement in the job creation rate, local value-addition along with technology depth in manufacturing," a report states. Interestingly, about 60 per cent of the overall global production of machine tools is accounted by five Asian nations - China, Japan, Taiwan, South Korea and India.

Understanding the fact that technology upgradation and enhancement will now play a major role, the IMTMA has taken the lead in arranging for technology missions for CEOs and senior executives of the member organisations to visit international machine tool exhibitions such as EMO, IMTS, SIMTOS, etc., as also visits to companies/institutions to gain an understanding of the latest technology advances in this sector. One such technology mission was to SIMTOS 2012 in Korea from April 15 to 21 that comprised 27 delegates representing 24 companies. The mission started with a visit to the exhibition and was followed with interactive meetings and visits to the Korea Machine Tool Manufacturers' Association, SIMPAC, YG-1 and Namsun Machinery Corporation to understand the best practices India could learn from.

As for the government's role in promoting the machine tools industry, the Centre has been adopting steps to enhance growth of the SMEs. Under one of the initiatives started by the MSME Ministry, 75 per cent of the fee payable to the rating agency is subsidised by the Centre through the National Small Industries Corporation (NSIC).This has helped enterprises in the machine tools industry understand the concept of rating in a better way. In collaboration with the NSIC, CRISIL rates micro and small enterprises (MSEs) on a two-dimensional rating scale known as the 'NSIC-CRISIL' scale. It evaluates any enterprise on criteria such as performance capability and financial strength. Meanwhile, the industry bodies are also holding discussions with the Centre for the establishment of a corpus to support the sector along with the setting up of regional machine tool clusters in Punjab, Gujarat, Pune, Belgaum and Coimbatore, all of which enjoy a good presence of machine tool manufacturers.Meanwhile, a further boost has been United Nations Industrial Development Organisation's project on technology upgrading and productivity enhancement of the machine tool industry in India. The UNIDO has sanctioned the project with a total outlay of USD 3 million with an IMTMA contribution of Rs 3.75 crore in kind. The project started from August 2009 and some of its objectives are:

• Benchmark technology and new product needs at the global market and the existing status of the Indian machine tool market and manufacturing technology base
• Study reports on technology mapping and gap identification
• Organise visits to technology shows
• Facilitate manufacturing efficient machine tools based upon improved designs and technology
• Provide training in CAD/CAE
• Bring about supply chain improvement through design inputs
• Develop clusters
• Increase the share of the domestic and global market through support to the Indian machine tool industry, enabling it to become an important player in the export market
• Build up institutional capacity for continuing training & formulation and implementation of development programmes needed for the machine tool industry for its sustained growth
• Develop training programs and R&D linkages with institutions, and
• Develop Vision 2020 for the industry.