By: Yash J. Munot, President, Association of Indian Forging Industry (AIFI)
India is today the world’s second-largest producer of forgings. We make close to 2.9 million tonnes a year, employ more than three lakh people directly, and export roughly 30 per cent of what we produce to Europe, North America and Asia. Crankshafts, axle beams, steering knuckles, railway wheels, valve bodies: a large share of the world’s vehicles and machines run on parts forged in Pune, Chennai, Aurangabad, Jamshedpur and Ludhiana.
That is a strong position. It is not a safe one.
The next eighteen months will change the rules of export competition more than the last decade did. Three forces are converging in 2027. Europe starts collecting money for carbon at its border. India’s trade agreements with the UK and the EU open doors that were half-shut. And the United States remains unpredictable. How Indian forgers respond to these three will decide whether we grow our export share or quietly lose it.
Carbon now has a price at Europe’s border
The European Union’s Carbon Border Adjustment Mechanism moved from paperwork to payment on 1 January 2026. Every tonne of covered iron and steel entering Europe this year is building a liability. Certificate sales open on 1 February 2027, and importers must settle their 2026 imports by 30 September 2027.
The detail forgers should worry about is the default values. Where a supplier cannot provide verified emissions data, the importer must use default figures that are deliberately conservative and carry a mark-up that rises every year. In plain terms, a European buyer who cannot get credible carbon data from an Indian supplier will pay more for that supplier’s parts. Sooner or later, that buyer will ask why they are buying from us at all.
Brussels has also proposed extending CBAM further down the metal value chain. We should plan on the assumption that forged and machined components will come into scope.
Forging is energy-intensive. Our furnaces, our yield losses and our scrap rates now show up in a customer’s carbon bill. The good news is that the actions that cut emissions also cut cost: induction heating, better furnace loading, near-net-shape forging that reduces input weight, heat recovery and renewable power. A plant that measures its carbon properly usually finds money it was already wasting.
My advice to every forging company exporting to Europe is simple. Start measuring emissions at the product level now, get the data verified, and put it in front of your customers before they ask. Carbon data will soon sit alongside the PPAP file.
Trade agreements open doors, but only for those ready to walk through
The India–UK trade agreement came into force this July. The India–EU FTA, concluded in January, is expected to be signed by the end of this year and take effect early in 2027, with duty-free access for around 93 per cent of Indian exports.
European duties on engineering goods are already modest, so the real value of the agreement lies elsewhere. It signals to European OEMs, many of whom are actively reducing dependence on single sourcing countries, that India is a long-term, rules-based partner.
But a trade agreement is not an order. European buyers will still audit our quality systems, delivery performance, traceability and, now, carbon footprint. Rules of origin will need careful documentation. Companies that prepare in the next six months will convert this opportunity. Those that wait will find their competitors already on the supplier panel.
The American lesson: never depend on one market
The past year showed how quickly things can move. In August 2025, US duties on most Indian goods rose to 50 per cent. By February 2026, most of that had been rolled back. Steel-related duties under Section 232 remain a separate cost for many of our products, and new tariff threats continue to surface in Washington.
The United States will remain an essential market for Indian forgings. But no forging company should let one country decide its future. The answer is to spread risk across geographies and across sectors:
● Geographies: Europe, the UK, the Middle East, Japan, Korea and Southeast Asia.
● Sectors: Automotive will remain our core, but railways, defence, mining, construction equipment, oil and gas, and power generation offer steadier demand and higher value per kilogram.
Compete on engineering, not only on price
For years, India won forging business mainly on cost. That advantage is real, but it is no longer enough on its own. Global customers are moving to fewer, deeper supplier relationships. They want partners who can:
● co-design a part;
● simulate the die before cutting steel;
● deliver the component machined and ready to assemble;
● support the programme for ten years.
This is where Indian forging must go next: from supplying forgings to supplying finished, engineered solutions. That means investing in simulation, die design, heat treatment, metallurgy, machining and testing. Above all, it means investing in people who can sit with a customer’s design team as equals.
The difficulty is that most of our industry is made up of small and medium enterprises. A large company can afford simulation software and a metallurgy lab; a 150-person family-run forge often cannot. That is why AIFI is setting up a Forging Simulation Centre in Pune, so that smaller members can access the same process-design tools as the largest players. Shared infrastructure of this kind will do more for the industry than any single company’s investment.
What we need from policy
Industry must do the heavy lifting, but three policy steps would make a real difference before 2027:
● CBAM readiness support for MSMEs. This means affordable emissions measurement and verification, and a strong push to have India’s own carbon market recognised by the EU, so Indian exporters are not charged twice.
● Competitive energy for energy-intensive manufacturing. Power and gas costs decide both our price and our carbon footprint. Easier open access to renewable power would address both at once.
● Technology upgrade support. A focused scheme for energy-efficient heating, automation and simulation in MSME forges would lift the whole ecosystem, not just its leaders.
The year that decides the decade
India has the capacity, the engineering talent and the entrepreneurial energy to become the world’s most trusted forging base. What 2027 will test is whether we can prove it with evidence: carbon data, quality data and delivery data.
Companies that treat 2027 as a compliance deadline will survive. Companies that treat it as a chance to rebuild how they compete will lead the next decade.
The timeline is short. The work starts now.