Indian Precision Tool Market

With industrial automation and infrastructural development taking place at a rapid pace all around the world, the demand for precision tools is rising exponentially. As per the latest data, by 2027, the Indian precision tool market is set to expand at a compound annual growth rate of 13.6%, reaching USD 102 billion.

Additionally, the Indian Precision Tool Market had a valuation of USD 1.4 billion in 2022. As per experts, between 2023 and 2028, this industry segment can expand at 9.4% CAGR, reaching USD 2.5 billion.

However, due to their high manufacturing costs, precision tool businesses are largely out of reach for small and medium-scale companies. Such companies, especially foreign ones, can consider manufacturing these tools in a country like India where the cost of production is lower than in other developing nations.

However, setting up a manufacturing plant in India can be a cumbersome process. Businesses require efficient local resources, strategic locations, and reliable distribution services.

Partnering up with an Indian manufacturing consulting firm can be an outstanding solution in this regard.

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How Global Businesses Can Benefit from the Indian Precision Tool Market

Here’s how international companies can benefit from entering the Indian precision tools market:

• Availability of Inexpensive Raw Materials and Labour

As mentioned before, businesses can lower production costs by manufacturing them locally in India. This is primarily because both raw materials and skilled labor are available in this country at low costs.

This lowers manufacturing costs significantly, allowing companies to offer their products at convenient rates. Moreover, doing so also helps businesses gain access to a greater share of the market in comparison to their competitors.

• Wide Consumer Base

India is a country with an increasing population. This factor contributes to growing its consumer base, which can help create a sustainable demand for a variety of goods. Now, as precision tools are being used in a multitude of industries, India’s ever-increasing population can create a rise in demand for such equipment.

• Ease of Manufacturing Products Locally

Due to the government’s industry-friendly policies, foreign companies can easily get permission to manufacture products in India. Moreover, thanks to the ‘Make in India’ initiative, it is now much easier for foreign businesses to indirectly invest in an Indian firm. Apart from this, if an organization wants to outsource its work, it can easily hire a local contract manufacturing partner in India.

• India’s Rapidly Developing Manufacturing Sector

As per reports, in 2023, India’s manufacturing sector is expected to generate revenue of USD 1,101 billion. Additionally, by 2025, the Indian precision tool market is predicted to expand at a CAGR of 1.60%.

These figures are proof that manufacturing activities will increase in India in the time to come. Thus, there will be a consistent demand for precision tools, which can be a profitable venture for foreign companies.

Detailed Insight into India’s Precision Tool Manufacturing Sector

In India, companies are rapidly employing automated machines to increase operational efficiency. These include the use of various tools, from workbench-mounted precision tools right up to large machines, which are used in industries related to precision engineering, consumer goods, electrical and electronics, automotive, defense, and aerospace.

Moreover, stringent quality guidelines by the Indian Government have made it necessary for several manufacturers to use such specialized tools. As time passes, companies have been increasingly relying on Computerised Numerical Control (CNC) for manufacturing goods with high precision. Apart from this, the rapid growth of small and medium-sized industries is driving up demand for these instruments.

Risks and Challenges Associated with the Precision Tool Industry

These are some of the challenges faced by precision tool manufacturers:

• Fluctuations in Steel Prices

The primary raw material needed for manufacturing precision tools is steel. Now, due to several micro and macroeconomic factors, the price of this commodity can fluctuate. For example, the Russian invasion of Ukraine resulted in a huge appreciation of steel prices, which in turn increased the cost of production for precision tools.

Additionally, significant price rises can affect the overall demand for the commodity, thereby affecting the entire sector as a whole.

• Demand for Smaller Batch Sizes

Another major challenge associated with the precision tool industry is the demand for smaller batch sizes. This is risky for businesses as manufacturing these tools is time-consuming and expensive. Thus, they are often not able to gain back the capital spent on manufacturing these small lots.

• Miniaturisation Trend

There is an increasing trend of machine parts becoming smaller to make them more energy efficient. This demands tighter tolerances and machinists having additional skills and using more expensive equipment. Furthermore, the miniaturization of machine parts also demands higher quality control as discrepancies can lead to major issues.

How a Manufacturing Consulting Firm can facilitate Indian Market Entry?

Foreign companies planning to manufacture precision tools in India need to set up plants that are efficient in terms of space, resources, and usability. However, there can be several regulatory compliances that they need to abide by before starting their activities.

In this regard, partnering with an Indian manufacturing consulting firm can be of great help. Companies like Tecnova can help foreign organizations select appropriate sites for establishing their factories as well as fulfill all the legal requirements. Moreover, they can also help foreign businesses search for Indian manufacturers in case they want to outsource their production.

Reference

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