GROWTH AMID GLOBAL TURBULENCE

Despite inflationary pressures, geopolitical tensions, and rising crude oil prices, India’s economy and machine tool industry demonstrated steady growth, improved investment sentiment, and strong export performance in FY2025–26.

In March 2026, India’s macroeconomic landscape exhibited a moderation in momentum as manufacturing and services PMI declined to multi-month lows of 53.9 and 57.5, respectively, amid rising input costs driven by the West Asian crisis.

Industrial Activity Remains Stable

Industrial activity remained broadly stable, with IIP (Index of Industrial Production) growth at 5.2 percent in February 2026 (vs. 5.1% in January). However, inflationary pressures edged higher, as CPI (Consumer Price Index) inflation rose to 3.4 percent in March 2026 from 3.2 percent in February, largely reflecting cost-push pressures from elevated energy prices linked to the ongoing geopolitical tensions in West Asia.

Meanwhile, headline WPI (Wholesale Price Index) inflation rose sharply to 3.9 percent from 2.1 percent over the same period, indicating a strong pickup in wholesale price momentum led by energy-linked and manufactured goods prices.

Fiscal Position Supported by Tax Revenue Growth

On the fiscal front, during April–February FY2025–26, the Government of India’s (GoI) gross tax revenues (GTR) grew by 6.7 percent, supported by a 5.9 percent increase in direct taxes and an 8.0 percent rise in indirect taxes. During the same period, GoI’s fiscal and revenue deficits stood at 80.4 percent and 73.8 percent of their respective annual revised estimates.

External Trade Weakens Amid Global Disruptions

On the external front, merchandise exports and imports contracted sharply by 7.4 percent and 6.5 percent, respectively, in March 2026, reflecting weak external demand and trade disruptions amid the West Asian crisis. Despite this, the merchandise trade deficit narrowed to a nine-month low of US$ 20.7 billion, as the decline in imports outpaced that in exports, partly due to global supply disruptions.

Investor Sentiment Improves

Net FDI (Foreign Direct Investment) and FPI (Foreign Portfolio Investment) recorded inflows of US$ 4.6 billion and US$ 2.9 billion, respectively, in February 2026, compared to outflows of US$ 1.4 billion and US$ 1.9 billion in January 2026. This indicates a cautious recovery in investor sentiment.

Rising Crude Oil Prices Pose Inflationary Risks

Global crude oil prices surged from US$ 68 per barrel in February 2026 to US$ 95.6 per barrel in March 2026 — the highest level since August 2022 — due to supply disruptions linked to the West Asian crisis.
According to the Asian Development Bank (ADB), regional growth is expected to remain steady. However, if crude oil prices rise further to around US$120 per barrel, India’s GDP growth could slow to nearly 6 percent, while inflation may rise to approximately 6 percent in FY2026–27.

India Strengthens Position in Global Machine Tool Industry

According to the World Machine Tool Industry Outlook – CY2025 by CECIMO, India ranks 9th globally in machine tool production and 4th globally in machine tool consumption. This highlights India’s growing significance in the global manufacturing ecosystem.

Indian Machine Tool Industry Records Strong Growth

The Indian Machine Tool industry delivered a strong performance in FY2025–26.

Production is estimated to have grown by 13 percent to INR 16,478 crore (US$ 1.9 billion).

Imports increased by 17 percent year-on-year to INR 21,932 crore (US$ 2.5 billion), indicating continued dependence on overseas supply. Exports registered a sharp growth of 79 percent, reaching INR 2,628 crore (US$ 0.3 billion), reflecting improved competitiveness and stronger global demand. Overall industry consumption grew by 13 percent to INR 35,782 crore (US$ 4.0 billion) during FY2025–26.

As global manufacturing undergoes structural shifts, India’s Machine Tool industry is expected to play an increasingly strategic role in supporting industrial growth and competitiveness. According to the World Machine Tool Industry Outlook – CY2025 by CECIMO, India ranks 9th globally in machine tool production and 4th globally in machine tool consumption. This highlights India’s growing significance in the global manufacturing ecosystem.

Source: IMTMA