On the canvas of the Indian
economy, automotive industry occupies a prominent
place. Due to its deep forward and backward linkages
with several key segments of the economy, automotive
industry has a strong multiplier effect and is
capable of being the driver of economic growth.
A sound transportation system plays a pivotal
role in the country's rapid economic and industrial
development. The well-developed Indian automotive
industry ably fulfils this catalytic role by producing
a wide variety of vehicles:passenger cars, light,
medium and heavy commercial vehicles, multi-utility
vehicles such as jeeps, scooters, motorcycles,
mopeds, three wheelers, tractors etc.
Automotive Industry comprises
of automobile and auto component sectors and is
one of the key drivers of the national economy
as it provides large-scale employment, having
a strong multiplier effect. Being one of the largest
industries in India, this industry has been witnessing
impressive growth during the last two decades.
It has been able to restructure itself, absorb
newer technology, align itself to the global developments
and realize its potential. This has significantly
increased automotive industry's contribution to
overall industrial growth in the country.
Drivers of Indian Automobile Market
- Rising industrial and agricultural output
- Rising per capita income
- Favourable demographic distribution with rising
working population and middle class Urbanisation
- Increasing disposable incomes in rural agri-sector
- Availability of a variety of vehicle models
meeting diverse needs and preferences
- Greater affordability of vehicles
- Easy finance schemes
- Favourable government policies
- Robust production
India's Position in
- Well-developed, globally competitive auto
- Established automobile testing and R&D
- Among one of the lowest cost producers of
steel in the world
- Worlds second largest manufacturer of
- Fifth largest manufacturer of commercial vehicles
- Manufactures largest number of tractors in
- Ninth largest car manufacturer in world
One of the major industrial sectors in India is the automobile sector. Subsequent to the liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian economy as this sector has witnessed tremendous growth.
Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial licence is required for setting up of any unit for manufacture of automobiles except in some special cases. The norms for Foreign Investment and import of technology have also been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive.
At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological upgradation on the royalty payment of 5% without any duration limit and lump sum payment of US$ 2 million is also allowed under automatic route in this sector. With the gradual liberalization of the automobile sector since 1991, the number of manufacturing facilities in India has grown progressively.