Analysing the Impact of Import Competition on the Performance of India's Machine Tools Industry

The paper tries to analyze the effects of import competition on the performance of the Indian Machine Tools industry. The analysis period is 1993–94 to 2015–16. Reforms in import policy have contributed to an increased import competition in the Indian Machine Tools industry. The analysis shows profit reducing effect of import competition. The foreign ownership of a firm, however, is seen to have a positive impact on its profit margins. The study indicates that while import competition may have an adverse effect on performance, increased investment in R&D and optimum utilization of capacity can counter such negative impacts. The results show that the risk of doing business is reduced with the advent of import competition. Growth in the manufacturing sector has led to a rapid increase in demand, especially for increasingly sophisticated Computer Numerical Control (CNC) machines. While imports have risen to meet the demand, growth of productivity through investments in R&D is crucial for ensuring good performance in the long run.