INDIAN MANUFACTURING ON AN UPWARD TRAJECTORY

The outlook for India's manufacturing sector remains encouraging as industrial activity, investment, and domestic demand continue to gather pace. This positive momentum has translated into a strong performance for the machine tool industry, which is steadily enhancing both its domestic capabilities and global competitiveness.

The fiscal year 2025–26 concluded with the Indian economy sustaining strong growth. Provisional national accounts estimates placed real GDP growth at 7.7 percent (2022–23 base year), an improvement over 7.1 percent in FY2024–25. In the fourth quarter, real GDP and Gross Value Added (GVA) expanded by 7.8 percent and 7.9 percent, respectively, indicating a marginal moderation from the 8.0 percent growth recorded for both in the preceding quarter.

High-frequency economic indicators pointed to strengthening domestic economic activity at the beginning of FY2026–27. In May 2026, the Manufacturing and Services Purchasing Managers' Index (PMI) increased to 55.0 and 59.8, respectively, reaching three-month and six-month highs, reflecting sustained expansion in business activity. Industrial production also gained momentum, with the Index of Industrial Production (IIP) under the 2022–23 base series growing by 4.9 percent in April 2026, a four-month high, compared with 3.2 percent in March 2026.

The Monetary Policy Committee retained the repo rate at 5.25 percent with a neutral policy stance in its June 2026 review. Headline CPI inflation increased to 3.9 percent in May 2026 from 3.5 percent in April, while WPI inflation (2022–23 base year) rose to 9.7 percent from 8.3 percent, reflecting broad-based price pressures.

On the fiscal front, the Government of India achieved its fiscal and revenue deficit targets of 4.4 percent and 1.5 percent of GDP, respectively, in FY2025–26, while gross tax revenues and total expenditure grew by 6.0 percent and 5.4 percent, respectively. Gross bank credit remained stable, growing by 16.0 percent in April 2026. On the external front, net FDI inflows increased sharply to US$ 6.6 billion, while net FPI outflows remained elevated.

On the external trade front, merchandise exports and imports grew by 18.0 percent and 20.6 percent, respectively, in May 2026, led by higher engineering goods exports and crude imports. The merchandise trade deficit remained elevated at US$ 28.2 billion, while global crude oil prices averaged US$ 100.4 per barrel during the month.

OECD projects global growth at 2.8 percent in 2026 and 3.1 percent in 2027, while India's real GDP is expected to grow by 6.6–6.8 percent in FY2026–27, supported by strong domestic fundamentals, resilient demand, and improving global supply conditions.

Machine Tool Industry Records Strong Growth

As per revised estimates from IMTMA (Indian Machine Tool Manufacturers’ Association), the production of the Indian Machine Tool industry in FY26 is estimated to have increased by around 19 percent year-on-year, reaching about INR 17,387 crore (US$ 2.0 B). The industry's imports in FY26 saw a rise of 16 percent year-on-year, amounting to INR 21,628 crore (US$ 2.4 B). Machine tool exports from India during FY26 surged by 76 percent, totalling INR 2,596 crore (US$ 0.3 B) and consumption is estimated to have increased by about 15 percent to reach INR 36,419 crore (US$ 4.1 B) in FY26.

Trade Highlights

In FY2025-26, China (30%), Japan (21%), and Germany (12%) emerged as the top countries for imports to India, contributing to 63 percent of the total machine tool imports. Presses (16%), Vertical Machining Centers (VMCs) (12%), and Lathes (10%) were the top machinery types imported, valued at INR 8,122 crore (US$ 923 M), constituting approximately 38 percent of total machine tool imports during the period.

In exports, Russia (34%), Vietnam (9%), and the UAE (7%) emerged as the major destinations, collectively representing 50 percent of total machine tool exports in FY2025-26, amounting to a total export value of INR 1,293 crore (US$ 147 M). Among the machinery types, VMCs (22%), Presses (15%), and Lathes (11%) stood out as the top three machinery types exported, with a combined value of INR 1,262 crore (US$ 143 M), accounting for roughly 49 percent of total machine tool exports during FY2025-26.

Source: Data & Policy Team, IMTMA