Friday, September 28, 2012

SMEs driving growth of Indian machine tool industry

Unarguably, the machine tool industry is one of the most important segments for industrial activity in India and one of the key ingredients needed for the development of the manufacturing sector. It is believed that the growth of this industry impacts the complete manufacturing industry, which holds importance for India’s strategic needs like defence, railways, infrastructure and atomic energy. It is also one of the major contributors towards the growth prospects of the small and medium manufacturing enterprises, which are considered as a major employment generator after agriculture.



It has been found that the growth in different sectors like metals, textiles, infrastructure, food processing, chemical and pharmaceuticals and power has been pushing the growth of this sector. The machine tool industry, which is dominated by the presence of nearly 70% small and medium enterprises (SMEs), has been taking steps and initiatives for expanding its reach but at the same time, different problems such as strong competition from imports, labour crunch, insufficient research and development (R&D) and jumping prices of metal and power have hindered the growth prospects. As India is making its presence felt in the international manufacturing market with the production of high quality and cost-competitive goods, it is slated to emerge as a global-level manufacturing hub in the next few years. Industry insiders believe that this sector has immense scope for improvement via research and development (R&D) and resolving manpower crunch by intensifying focus on training.



SMEs making major contribution to Indian machine tool industry Most of the small and mid-sized enterprises operational in this industry are first time entrepreneurs. Over the years, the machine tool industry has acted as a platform for various entrant SMEs that wanted to prove their mettle at 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. Few emerging machine tool SMEs proving their mettle at global level are Geeta Machine tools Pvt ltd and Jaswinder Machine Tools. Geeta Machine tools has the second largest in house infrastructure/facilities for building machine tools, while Jaswinder Machine Tools bagged the recognition of making timely delivery of bulk orders in India.



Facts about Indian Machines tools Industry As per the present market trends, SMEs are considered as the lifeline of the Indian machine tool industry. The country has successfully emerged as the nerve centre of the machine tool industry in Asia and its technological capabilities are considered superior to its peer groups in other nations. This industry is primarily engaged in the manufacturing of complete range of metal-cutting and metal-forming machine tools. Although these products are customised in nature, the Indian basket consists of conventional machine tools and also computer numerically controlled (CNC) machines. There are different variants provided by the Indian manufacturers consisting 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 the recent times, majority of SMEs are entering the CNC segment due to its high profitability. Concerted efforts are being taken by the industry players to bring improvement in the features of CNC machines. They are also offering further value additions at lower costs with the aim to solve the issue of specific user needs. In regard to the present trends, it is believed that CNC segment could become the growth driver for the machine tool industry in India.



Presence of Machine tools manufacturers in India Recent reports suggest that majority of the machine tool manufacturers are situated in Karnataka and Maharashtra. Bangalore is considered as the base for most of the machine tool companies. In India, indigenous machine tool enjoys the highest effect on capital output ratios. Machine tool consumption completely supports the advancement of the engineering sector output. The international players are present in India either via their marketing agents, technical centers, service centers or assembly centers.



Booming industry upbeat about growing demand The Indian machine tool industry has shown its commitment to meet close to 33% of the overall consumption despite facing capacity constraints in the absence of insufficient investments. According to the data from Indian Machine Tool Manufacturers' Association (IMTMA), out of the Rs 11,818-crore sales revenue generated in 2010-11 from consumption, imports was at Rs 7,722 crore and the domestic output accounted for Rs 4,096 crore. In regard to the orders booked, demand for CNC machines during FY11 was worth Rs 3,775 crore while the non-CNC machines touched Rs 1,203 crore. Analysts are of the opinion that it is time for India to raise the production capacity at CAGR of 25% as the domestic auto 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 $2-billion investment every year. Also, the Indian machine tool manufacturers would be required to strengthen capacity by 7-8 times to fulfil the demand.Unarguably, the machine tool industry is one of the most important segments for industrial activity in India and one of the key ingredients needed for the development of the manufacturing sector. It is believed that the growth of this industry impacts the complete manufacturing industry, which holds importance for India’s strategic needs like defence, railways, infrastructure and atomic energy. It is also one of the major contributors towards the growth prospects of the small and medium manufacturing enterprises, which are considered as a major employment generator after agriculture.



It has been found that the growth in different sectors like metals, textiles, infrastructure, food processing, chemical and pharmaceuticals and power has been pushing the growth of this sector. The machine tool industry, which is dominated by the presence of nearly 70% small and medium enterprises (SMEs), has been taking steps and initiatives for expanding its reach but at the same time, different problems such as strong competition from imports, labour crunch, insufficient research and development (R&D) and jumping prices of metal and power have hindered the growth prospects. As India is making its presence felt in the international manufacturing market with the production of high quality and cost-competitive goods, it is slated to emerge as a global-level manufacturing hub in the next few years. Industry insiders believe that this sector has immense scope for improvement via research and development (R&D) and resolving manpower crunch by intensifying focus on training.



SMEs making major contribution to Indian machine tool industry Most of the small and mid-sized enterprises operational in this industry are first time entrepreneurs. Over the years, the machine tool industry has acted as a platform for various entrant SMEs that wanted to prove their mettle at 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. Few emerging machine tool SMEs proving their mettle at global level are Geeta Machine tools Pvt ltd and Jaswinder Machine Tools. Geeta Machine tools has the second largest in house infrastructure/facilities for building machine tools, while Jaswinder Machine Tools bagged the recognition of making timely delivery of bulk orders in India.



Facts about Indian Machines tools Industry As per the present market trends, SMEs are considered as the lifeline of the Indian machine tool industry. The country has successfully emerged as the nerve centre of the machine tool industry in Asia and its technological capabilities are considered superior to its peer groups in other nations. This industry is primarily engaged in the manufacturing of complete range of metal-cutting and metal-forming machine tools. Although these products are customised in nature, the Indian basket consists of conventional machine tools and also computer numerically controlled (CNC) machines. There are different variants provided by the Indian manufacturers consisting 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 the recent times, majority of SMEs are entering the CNC segment due to its high profitability. Concerted efforts are being taken by the industry players to bring improvement in the features of CNC machines. They are also offering further value additions at lower costs with the aim to solve the issue of specific user needs. In regard to the present trends, it is believed that CNC segment could become the growth driver for the machine tool industry in India.



Presence of Machine tools manufacturers in India Recent reports suggest that majority of the machine tool manufacturers are situated in Karnataka and Maharashtra. Bangalore is considered as the base for most of the machine tool companies. In India, indigenous machine tool enjoys the highest effect on capital output ratios. Machine tool consumption completely supports the advancement of the engineering sector output. The international players are present in India either via their marketing agents, technical centers, service centers or assembly centers.



Booming industry upbeat about growing demand The Indian machine tool industry has shown its commitment to meet close to 33% of the overall consumption despite facing capacity constraints in the absence of insufficient investments. According to the data from Indian Machine Tool Manufacturers' Association (IMTMA), out of the Rs 11,818-crore sales revenue generated in 2010-11 from consumption, imports was at Rs 7,722 crore and the domestic output accounted for Rs 4,096 crore. In regard to the orders booked, demand for CNC machines during FY11 was worth Rs 3,775 crore while the non-CNC machines touched Rs 1,203 crore. Analysts are of the opinion that it is time for India to raise the production capacity at CAGR of 25% as the domestic auto 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 $2-billion investment every year. Also, the Indian machine tool manufacturers would be required to strengthen capacity by 7-8 times to fulfil the demand.



Innovation holds key to Indian machine tools industry Although, this industry has potential to play significant role in attaining the desired goal of 12-14% production growth, set by Planning Commission, over the medium term in the 12th five year plan period but it will also need innovation to achieve desired growth results. 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. Experts are of the opinion that the growth target is achievable with considerable improvement in the job creation rate, local value addition along with technology depth in manufacturing. Reports suggest that over 60% of the overall global production is accounted by five Asian nations - China, Japan, Taiwan, South Korea and India.



Centre adopting steps to enhance growth of the machine tool SMEs As the industry is primarily dominated by the SMEs, an initiative was started by the MSME Ministry, under which 75% of the fee payable to the rating agency is subsidised by Centre through 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 NSIC, CRISIL rates micro and small enterprises (MSEs) on a two-dimensional rating scale known as ‘NSIC-CRISIL’ scale. It evaluates any enterprise on criteria such as performance capability and financial strength. Performance capability is checked on a five-point scale and the financial strength is reviewed on a three-point scale. The industry bodies are also holding discussions with Centre for the establishment of corpus to support the sector along with setting up of regional machine tool clusters in Punjab, Gujarat, Pune, Belgaum and Coimbatore, all of which enjoy considerable machine tool industry presence.



Conclusion As the Industry is conducting various exhibitions and events such as IMTEX, ToolTech, it will prove helpful in enhancing the productivity of the sector. Also, a significant transformation will take place among the SMEs in machine tool sector if they aim to climb the value chain. The SME units should try to understand the market needs and offer holistic manufacturing solutions. India should hope for only better days ahead due to the risen global participation and more foreign investment. As the machine tools industry has hogged limelight with strong growth prospects, it is right time for the sector to prove its mettle.



Innovation holds key to Indian machine tools industry Although, this industry has potential to play significant role in attaining the desired goal of 12-14% production growth, set by Planning Commission, over the medium term in the 12th five year plan period but it will also need innovation to achieve desired growth results. 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. Experts are of the opinion that the growth target is achievable with considerable improvement in the job creation rate, local value addition along with technology depth in manufacturing. Reports suggest that over 60% of the overall global production is accounted by five Asian nations - China, Japan, Taiwan, South Korea and India.



Centre adopting steps to enhance growth of the machine tool SMEs As the industry is primarily dominated by the SMEs, an initiative was started by the MSME Ministry, under which 75% of the fee payable to the rating agency is subsidised by Centre through 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 NSIC, CRISIL rates micro and small enterprises (MSEs) on a two-dimensional rating scale known as ‘NSIC-CRISIL’ scale. It evaluates any enterprise on criteria such as performance capability and financial strength. Performance capability is checked on a five-point scale and the financial strength is reviewed on a three-point scale. The industry bodies are also holding discussions with Centre for the establishment of corpus to support the sector along with setting up of regional machine tool clusters in Punjab, Gujarat, Pune, Belgaum and Coimbatore, all of which enjoy considerable machine tool industry presence.



Conclusion As the Industry is conducting various exhibitions and events such as IMTEX, ToolTech, it will prove helpful in enhancing the productivity of the sector. Also, a significant transformation will take place among the SMEs in machine tool sector if they aim to climb the value chain. The SME units should try to understand the market needs and offer holistic manufacturing solutions. India should hope for only better days ahead due to the risen global participation and more foreign investment. As the machine tools industry has hogged limelight with strong growth prospects, it is right time for the sector to prove its mettle.

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