Forging production in India to grow 9.5% by 2018

05 December 2016

The Indian forging industry is likely to grow at CAGR of 9.5 percent by 2018, production wise, and reach to 2.97 mn MT in FY 2017-18 from 2.25 mn MT during FY 2014-15, according to Association of Indian Forging Industry (AIFI).

As per the survey conducted by AIFI in 2016, the estimated turnover of the 384 forging units operating in FY 2014-15 was Rs 27,835 crore including Rs 6,100 crore contributed from exports, providing employment to approximately 100,000 people in the country. Overall production of forgings increased from 2.11 mn MT to 2.25 mn MT in 2014-15 and the production figure for 2015-16 is estimated around 2.45 mn MT.

The survey further added that with an installed capacity of around 3.76 mn MT, Indian forging industry has a capability to forge variety of raw materials like carbon steel, alloy steel, stainless steel, super alloy, titanium, copper, brass and aluminum. The overall capacity utilisation of industry is also improved in FY 2014-15 stood at around 60 percent against 55 percent in FY 2013-14.

Anticipating revival, Government’s thrust on manufacturing sector with initiatives like ‘Make in India’ and ‘Skill India’ has definitely created positive economic sentiments amongst the business community. Many global OEMs and Tier-I players are setting up purchasing offices in India and looking at procuring high standard quality products, said the Association.

Talking about government’s recent move on demonetisation, as per industry experts, all segments are likely to post a decline in November sales, which may potentially shave off as much as 2 percentage points from annual GDP growth. Industry feels that while the impact would obviously be more in the short term, however, the flushing out of unaccounted cash from the system is going to have a positive impact in the medium to long-term.

Muralishankar Sambasivam, Vice President, Association of Indian Forging Industry, said, “From the long term perspective it is definitely a positive move by the government in the right direction. This will see banks offering lower rate of interests to consumers which in-turn will result in increased investments in real estate and automobiles sectors. In the long run with the anticipation of introduction of GST and the positive impact of demonisation, things should pick up from the first quarter of 2017 fiscal year.”

Muralishankar added, “With the decision to scrap the legal tender of Rs 500 and Rs 1,000 notes could impact vehicle sales in the rural markets. During November, the two-wheeler segment, where rural demand plays a major role, sales have fallen 25-30 percent, while in trucks, retail sales are down 40-50 percent. Also uncertainty over cash supply will definitely water down the positive impact which was anticipated of good monsoon this year.”

Considering the overall outlook, the forging industry has witnessed a flat growth over the last two years. Both domestic production and domestic sales have grown at a slower pace in the period of April- October 2016 vis-à- vis the same period last year, barring the domestic sales of passenger vehicles (11.02 percent) and tractors (20 percent) which registered a faster growth rate during the same period this year.

Overall the forging industry will witness a flat rate of growth this year, but there are enough positive indications in the long term which will put the industry back on the growth track.

Source – ET