MANUFACTURING MOMENTUM DRIVES INDIA’S MACHINE TOOL MARKET

India’s strong economic growth and manufacturing expansion are driving rising demand for machine tools. Domestic production is improving, while exports shows growth.

India’s economic momentum remained strong at the start of 2026. The Manufacturing PMI stood at 55.4, while the Services PMI was 58.5 in January 2026, both remaining well above the 50-mark threshold, indicating continued expansion in private sector activity. Industrial performance also showed notable improvement. The Index of Industrial Production (IIP) rose to a 26-month high of 7.8 percent in December 2025, compared to 7.1 percent in November 2025, reflecting strengthening output across key industrial segments.

The Reserve Bank of India retained the repo rate at 5.25 percent in its monetary policy review held on February 6, 2026. CPI inflation stood at 2.8 percent in January 2026 (2024 base), up from 1.2 percent in December 2025, while core CPI remained moderate at 3.4 percent. Headline WPI inflation (2011–12 series) increased slightly to 1.8 percent from 0.8 percent, though overall price pressures remained contained, supported by low food and manufactured product inflation and continued contraction in mineral oil and crude prices.

Government Spending Supports Industrial Growth

The Government of India’s gross tax revenues (GTR) grew by 8.5 percent during April–December FY26. However, as per the FY27 Union Budget, the FY26 Revised Estimates have been lowered from INR 42.7 lakh crore to INR 40.8 lakh crore, reflecting a downward revision of INR 1.9 lakh crore in revenue projections. During the same period, total expenditure grew by 4.6 percent, with revenue expenditure increasing by 1.8 percent and capital expenditure registering a stronger growth of 15.0 percent, highlighting the continued emphasis on asset creation. Fiscal and revenue deficits stood at 54.9 percent and 21.6 percent of their respective annual revised estimates, while the FY27 Union Budget indicated that the FY26 fiscal deficit target of 4.4 percent of GDP is likely to be achieved.

Trade Dynamics

India’s merchandise trade deficit widened sharply to US$ 34.7 billion in January 2026 from US$ 25.0 billion in December 2025, as export growth remained subdued at 0.6 percent while imports surged by 19.2 percent mainly due to a sharp spike in gold and silver imports. Average global crude oil price increased from US$ 60.9 per barrel in December 2025 to US$ 63.7 per barrel in January 2026, after falling to its lowest level since February 2021, indicating a modest recovery in international oil prices. The International Monetary Fund (IMF) has projected global growth at 3.3 percent in 2026 and 3.2 percent in 2027, while India’s growth is forecast at 6.4 percent for both FY27 and FY28, indicating relatively stronger economic momentum compared to the global average.

Machine Tool Industry Records Strong Growth

The Indian Machine Tool industry’s production is estimated to have grown by around 10 percent year-on-year in CY2025, reaching INR 12,930 crore (US$ 1.48 B). Imports registered a sharper increase of 23 percent, amounting to INR 17,561 crore (US$ 2.5 B). Exports recorded a significant growth of 83 percent, rising to INR 2,599 crore (US$ 298 M). Overall consumption is estimated to have expanded by 17 percent year-on-year to INR 32,632 crore (US$ 3.7 B) in CY2025, reflecting strong domestic demand and increased trade activity.

Import Dependence Remains High

In CY2025, China (27%), Japan (23%), and Germany (12%) emerged as the top countries for imports to India, contributing to 62 percent of the total machine tool imports. Presses (17%), VMCs (13%) and Turning Centers (9%) were the top machinery types imported, valued at INR 8,764 crore (US$ 1,008 M), constituting approximately 39 percent of total machine tool imports during the period.

Export Markets Expand

For exports, Russia (33%), UAE (8%), and Vietnam (7%) emerged as the top three export destinations, accounting for 48 percent of total machine tool exports in CY2025, with a total export value of INR 1,249 crore (US$ 143 M). VMCs (21%), Presses (16%), and Turning Centers (11%) were the top three machinery types exported, valued at INR 1,257 crore (US$ 144 M), constituting approximately 48 percent of total machine tool exports during CY2025.

Source: Data Analytics & Policy Team, IMTMA