The necessity of this Mission Plan arises in the background of a newfound
strength and resurgence in the Indian manufacturing sector. For most of the decade of
the 1990s, post the economic deregulation in 1991, growth in the Indian economy has
been led by growth in the service sector, a growth that has overshadowed the growth
in the manufacturing sector. In the past few years, several industries in the Indian
manufacturing sector have become internationally competitive and have acquired a
new energy to grow. Several industries, including the automotive industry, genuinely
believe that they can become world-beaters.
In developing a Mission Plan for India’s automotive sector, answer to the
following questions has been sought:
(i) Where is automotive sector in India today? What linkages does the
automotive sector have with other facets of the India’s economy?
(ii) What do we want the automotive sector of India to look like in 2016? In
other words, what is the potential of the automotive sector to grow along all
segments of its value chain, and what can be the maximum positive impact
on the stakeholders?
(iii) How do we attain the vision? What policy interventions will facilitate the
attainment of this potential?
Vision for the Future: The opportunity landscape for the Indian auto industry
would encompass manufacture of vehicles and components for domestic sales,
manufacture for exports (both vehicles and components), and export of services in
areas such as design, engineering, and back office operations. It is estimated that the
total turnover of the automotive industry in India would be in the order of USD 122-159
billion in 2016 (a substantial increase from the size of USD 34 billion in 2006).
It is expected that in real terms, India would continue to enjoy its eminent
position of being the largest tractor and three wheeler manufacturer in the world and
the world’s second largest two wheeler manufacturer. By 2016, India would emerge as
the world’s seventh largest car producer (as compared to the eleventh largest
currently) and retain 4th largest position in world truck manufacturing sector. Further, by
2016, the automotive sector would double its contribution to the country’s GDP from
current levels of 5% to 10%. Its contribution to the manufacturing sector would rise to
30-35% from the current level of 17%. This is because the share of manufacturing in
GDP is expected to go up to around 35% from current level of 17% by 2016.
Implementing AMP 2006-2016 would need an incremental investment in the
order of USD 35-40 billion to come into Indian auto industry over the next ten years
(2006-2016). It is anticipated that the bulk of this investment will come from expansion
of capacities by existing manufacturers operating in India and remaining from global
multinational corporations (MNCs) seeking to make India their manufacturing base.
Competition for attracting investments in India would come from countries such as
China and Thailand. Currently the automotive industry employs 200,000 persons in vehicle
manufacturing, 250,000 in component companies and 10 million at different levels of
the value chain – both through backward and forward linkages. The expected growth in
investments and output of India’s automotive sector during the next 10 years will create
further employment opportunities in the country. Additional 25 million jobs are likely to
be created by way of both direct and indirect employment in automotive companies
and in other parts of the vehicle value chain such as servicing, repairs, sales and
distribution chains.
Vision Statement: Based on the above scenario, the Vision Statement for
India’s automotive sector will be as follows:
“To emerge as the destination of choice in Asia for the design and manufacture
of automobiles and automotive components. The output of India’s automotive
sector will be USD 145 billion, contributing to more than 10% of India’s Gross
Domestic Product and providing employment to 25 million persons additionally
by 2016”.
The Way Forward: The future challenges for the Indian automobile industry in
achieving the targets defined in the Automotive Mission Plan would primarily consist of
developing a supply base in terms of technical and human capabilities, achieving
economies of scale and lowering manufacturing costs, overcoming infrastructural
bottlenecks, while at the same time stimulating domestic demand and exploiting export
and international business opportunities.
Interventions envisaged are required at two levels – Industry and the
Government. The Government would play a key enabling role in facilitating
infrastructure creation, promote the country’s capabilities, create a favourable and
predictable business environment, attract investments and promote R&D. The role of
Industry will primarily be in designing and manufacturing products of world-class quality
standards, cost competitiveness, improving productivity of both labour and capital,
achieving scale and R & D capabilities and showcasing India’s products in potential
markets. Attaining Vision 2016 for the automotive sector in India is a goal for both
Government and Industry definitely worth striving for.
The path of implementation of the Vision 2016 calls for some decisive action on
part of state and central Governments. The challenges for industry essentially call for a
matching vision and action to attain global standards in operational efficiency. Given
the commitment of the Government of India, and the fundamental competitiveness of
the Indian automotive industry, achieving the targets defined in the Mission Plan is a
doable challenge and would be rewarding for all stakeholders.
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