The Indian Forging Industry has emerged as a major contributor to the manufacturing sector of the Indian Economy.

The salient features in which the Indian forging industry functions is summarized in the ensuing paragraphs:

Briefly, the composition of the Indian forging industry can be categorized into four sectors - large, medium, small and tiny. As is the case world over, a major portion of this industry is made up of small and medium units/enterprises (SMEs).

Only about 5% is made up by the large enterprises in terms of number. Out of the 330 odd units the large sector consists of about 9-10 units, the medium and small sectors consists of about 100 units and under the tiny sector, the units functioning are far too many and the number is difficult to estimate.

The industry was previously more labour intensive (it is estimated that this industry provides direct employment to about 38000 people),but now with increasing globalization it is becoming more capital intensive. The total investment in the large and medium sectors is estimated to be around US$600 million. The small scale units too are increasing their capital investment to keep pace with the increasing demand especially in the global markets as also to broaden the areas of demand for forgings. Many of them are now suppliers to Original Equipment Manufacturers (OEMs) in the automobile sector also, which speaks volumes about efforts at technology and quality up gradation.

DOMESTIC AND EXPORT PERFORMANCE OF THE INDIAN FORGING INDUSTRY DURING THE YEAR 2006-07

The year 2006-07(April-March) was a good year for the Forging industry.The revival which started in October 2002 picked up momentum since last few years. Overall production of forgings increased to reach about 9,83,000 tonnes in the year. Capacity utilization also improved considerably from 40-50 percent in earlier years to 65 per cent of the additional capacity added during the last two years (1.5 Million approx)inclusive of overseas acquisitions. This was largely due to the revival in demand from the automotive sector and particularly the passenger car segment which recorded an excellent performance in both in the domestic market and exports.

While the automotive industry is the main customer for forgings, the industry’s continuous efforts in upgrading technologies and diversifying product range have enabled it to expand its base of customers to foreign markets. The Indian forging industry is increasingly addressing opportunities arising out of the growing trend among global automotive OEMs to outsource components from manufacturers in low-cost countries. As a result, Indian forging industry has been making significant contributions to country’s growing exports.

The industry’s exports recorded a growth of almost 20% in 2006-07 and have reached a level of US$ 360 million. Technological developments have also contributed to export growth. The industry’s major markets are USA, Europe and China. However, only about 30-35 manufacturing units are currently directly engaged in exports. Efforts of AIFI are to attract more manufacturing units to export. This is being done through increased facilitation by way of organizing Training Sessions, Workshops, Trade Fairs I Exhibitions, Buyer-Seller Meets etc. The technology gap is therefore, being sought to be bridged so that companies are prepared to face challenges of global markets.

Inorganic growth is another strategy being used by Indian companies to expand their global footprint and establish a global presence in some of the world’s largest markets. In the past few years companies like Bharat Forge (India’s Number 1 forging company,Sundaram Fasteners Ltd.(SFL), Amtek Group, EL Forge Ltd acquired Forging Companies in Europe, USA, China etc. It is expected that Indian companies will continue to aggressively pursue inorganic growth opportunities in future.

On the domestic front too many Indian forging companies (most of who are AIFI members) have posted excellent results in 2006-07.

Many large and medium forging companies also took important initiatives in capacity expansion modernization, cost rationalization etc. Notwithstanding this, the industry had also to contend with its share of problems. It had to bear the brunt of steep and frequent increases in the cost of major inputs like power and fuel, forging quality steel etc. For a major part of the year, the industry has grappled with this issue and managed to keep floating under these adverse circumstances.

User industries are also reluctant to increase prices across the board.The industry is not fully compensated for increase in conversion cost on account of steep increases in power, fuel etc.

In addition, increasing cost of other inputs like petroleum products, power ,implementation of stringent environment pollution norms etc., are challenges that the industry had to face.