GROWTH DRIVES MACHINE TOOL DEMAND

India’s robust economic activity and continued focus on investment are creating favorable conditions for manufacturing. The machine tool industry is reflecting this positive outlook, with production rising approximately 26 percent and consumption growing 20 percent in Q1 FY27.

The economic performance indicators for July 2026 reflect a continued expansion in economic activity, with manufacturing and services PMI remaining firmly above the benchmark level of 50. Overall industrial activity also strengthened, with IIP growth reaching a 23-month high of 7.3 percent in June 2026.

Inflation and Fiscal Conditions

Inflationary pressures remained relatively contained at the retail level, with CPI inflation stable at a seven-month high of 4.4 percent in July 2026, slightly above the RBI’s medium-term target of 4 percent. However, WPI inflation remained elevated at 9.8 percent during the month.

In Q1 FY2026-27, gross tax revenues grew 3.7 percent, total expenditure 11 percent, and capital expenditure 23.7 percent, while the fiscal deficit stood at 18.2 percent of the annual budgeted target.

Credit and Investment

Support Growth

Gross bank credit growth accelerated to a 25-month high of 18.6 percent in June 2026, while net FDI and FPI recorded inflows of US$ 1.3 billion and US$ 2.5 billion, respectively. The RBI kept the repo rate unchanged at 5.25 percent in August, retaining a neutral policy stance.

Trade and Global Outlook

In external trade, merchandise export growth accelerated to 19.6 percent in July 2026, while imports grew by 17.5 percent, resulting in the trade deficit widening to US$ 32.0 billion.

The IMF has projected global growth at 3.0 percent in 2026 and 3.4 percent in 2027. With buoyant demand and continued government focus on capital expenditure, India’s real GDP growth in FY2026-27 is expected at 7.0–7.2 percent, while nominal growth is projected at 12.5–13.0 percent.

Machine Tool Industry Expands

According to the latest World Machine Tool Survey by Gardner Intelligence, India ranked 5th in consumption and 9th globally in production in 2025.

The industry’s imports in Q1 FY27 saw a rise of 12 percent year-on-year, amounting to INR 6,460 crore (US$ 682 million). Machine tool exports from India declined by 20 percent during Q1 FY27, amounting to INR 498 crore (US$ 53 million), while consumption is estimated to have increased by about 20 percent to reach INR 9,257 crore (US$ 978 million).

Source: Data Analytics & Policy Team, IMTMA