in India The fabricated metal products industry in ... - TeknikfÃ¶retagen

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Growth in the manufacture sector is leading to development of the industry With the domestic manufacturing sector growing steadily, the market for the fabricated metal products industry is set to increase, because the user industries are growing steadily. Currently, the industry is highly fragmented and scattered. The industry is undergoing much needed structural changes and evaluating solutions to challenges such as low productivity. Measures are being undertaken to develop the industry close to manufacturing hubs. For instance, Chennai in South India is a major automotive hub. Since the forging industry derives 65–70 per cent of its demand from the automotive industry, more forging companies are being set up near Chennai; for instance, Caparo Plc from the United Kingdom. 8 Size and structure of the fabricated metal products industry The fabricated metal products industry produces a wide range of products. It is characterized by very few large companies, mostly PSEs at the top of the pyramid followed by a large number of SMEs and even smaller enterprises that are run as family businesses. The industry is highly fragmented, but over the last few years, it has been going through significant structural changes. Forging industry The Indian forging industry has emerged as a major contributor to the fabricated metal products industry in India. Forging industry is a basic industry, where forgings are produced through different methods which include open die forging, closed die forging and near net shape/ precision forgings. Such industries tend to grow in a country in relation to the rate of growth of its GDP. The Indian GDP is expected to grow steadily, so the basic industries will grow and so will the forging industry. The industry was more labour intensive previously. It is estimated that the industry provides employment (direct and indirect) to about 200 000 people. Now with increasing globalization, the industry is becoming more capital intensive. However, the high cost of capital (technology) still remains a major constraint facing the forging industry (especially the SMEs). 9 8) Reference has been made to The Hindu Business Line (12th May 2004) 9) Reference has been made to Association of Indian Forging Industry (3rd August 2008) 10
Size and structure of the industry The composition of the Indian forging industry can be categorized into four parts – large, medium, small and tiny. The Indian forging industry still remains highly fragmented, with approximately 400 units (out of which only 9–10 are large units scattered all over India). Hence, SMEs form the backbone of the industry. The organized sector accounts for about 65–70 per cent of the total forging production in the country, while unorganized players cater mainly to job work and the replacement market or tier 3 or tier 4 component manufacturers. A wide range of products are being manufactured through technological developments catering to a diverse market. It is perhaps because of this, that cases of domestic consolidation have been few in the industry, unlike in other industries. 10 Given below is the production trend of the forging industry in India. It can be seen that there has been a slow but steady increase in rate of growth of production. Production grew substantially in the year 2006–2007 but is set to record relatively flat growth in 2007–2008. This can be attributed partly to the slight decline in the automotive industry in recent times. PRODUCTION TREND OF FORGING INDUSTRY IN INDIA Production figures from 2003–2004 till 2007–2008 (April–December) have been shown in ‘000 Tonnes. 416.5 297.3 318.1 331.5 352.6 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 (April to December) Source: Ministry of Commerce and Industry 10) Reference has been made to Ministry of Commerce and Industry (2008b) and Association of Indian Forging Industry (3rd August 2008) 11
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