The Automotive Industry in India is one of the largest and most prosperous industries and by the end of 2016 India is projected to become the 3rd largest automotive market by volume in the world. The Indian Government aims to become the 4th largest automotive manufacturing hub worldwide by 2020. The Automotive Industry in India accounts for 7% of country’s GDP and almost 45% of the manufacturing GDP. Currently, the Automobile Industry in India is evaluated at around $67 billion and expected to reach $299 billion in the coming decade. The actual growth rate of this industry is registered at around 8% and has the potential to attain top spot worldwide. The exports this year are evaluated at approximately $10.5 billion. In order to become more competitive in this respective sector, the Government plans to make the quality and safety standards more in line with the world standards. What are the policy reforms and initiatives made by the Indian Government to promote the Automotive Industry?
Surge in demand for cars and over 2.57 million units manufactured this year has made India the 5th largest car manufacturer in the world overtaking South Korea. The Automotive Component Manufacturers Association of India (ACMA) stated that by the 2026, the Indian automobile aftermarket sector will grow to $30-32 billion in comparison to the current $6.5 billion.
The GST (Goods & Services Tax) law currently proposes a dual duty structure for automobiles which is 18% for non-luxury vehicle and 40% for luxury cars. The Society of Indian Automobile Manufacturer (SIAM) has recently suggested GST rates to the Government while urging to consider them more sensitively for this sector. Implementation of GST will uniform the tax regime, which will help streamline logistics and sourcing which is expected to in turn reduce automobile manufacturing costs.
The Automotive Industry is a key driver of the ‘Make in India’ program since the Government predicts the market for passenger vehicle to reach 9.4 million units by 2026. In this period the exports are expected to increase by 5 times for automotive vehicles and 7.5 times for components. The Auto Mission Plan (AMP) 2016-2026 which is a joint vision of the Indian Government and the Indian Automotive Industry, expects the industry to generate 65 million jobs and $300 billion revenue by 2026. AMP aims the Automotive Industry to contribute 12% share in GDP in future. Furthermore, it aspire India to be one of the top 3 worldwide in the Automotive Industry in terms of engineering, manufacture and export of automobile and automotive components by 2026. The mission also seeks an evolution in the automobile, component and automotive service sectors by guiding specific policies for R&D, technology, testing, manufacturing, import / export, sale, use, repair, and recycling.
In order to meet world standards in quality and safety, the Government has initiated the set-up of vehicle testing facilities and crash test labs across the country which will enable buyers to assess the safety standard and fuel efficiency of their vehicles. The plan is to set-up 7 testing facilities in cities such as Bengaluru, Pune and Chennai and every vehicle will be given a star rating according to their safety and fuel efficiency. The facilities will be built under the surveillance of National Automotive Testing and R&D Infrastructure Project (NATRIP) and it will cost $554 million to develop. The Government will set up the Bharat National Car Assessment Programme (B-NCAP) to have safer cars for India by making the European car safety features mandatory in India. Once the policy comes in action, all the car manufacturers have to display their star ratings. The policy maker’s priority is to boost exports by improving quality as buyers around the world are now paying more attention to safety and quality.
Looking at the number of patents registered for new innovation in the Automotive Industry, India lacks behind due to less focus on research and innovation. The Government has thus made efforts to frame policies to promote innovation and research in the sector. With this, it also urges automobile manufacturers not to compromise on quality in order to increase employment rate and exports in the sector. Additionally, licensing and approvals are exempted in Automobile manufacturing and import sector. Rebates are provided by different states of India such as rebates in land acquisition, relaxation in stamp duty, power tariff incentives, backward areas subsidies, and special incentive package for large-scale projects. The Government offers high incentives for R&D investment in this sector, this has already led several automobile manufacturers to develop and expand their research centres in India.
With these positive developments initiated by the Indian Government in collaboration with the Indian Automotive Industry, global auto makers consider India a preferred destination for design and manufacture.
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