Automotive industry is the key driver of any growing economy. It plays a pivotal role in country's rapid economic and industrial development. It caters to the requirement of equipment for basic industries like steel, non-ferrous metals, fertilisers, refineries, petrochemicals, shipping, textiles, plastics, glass, rubber, capital equipments, logistics, paper, cement, sugar, etc. It facilitates the improvement in various infrastructure facilities like power, rail and road transport. Due to its deep forward and backward linkages with almost every segment of the economy, the industry has a strong and positive multiplier effect and thus propels progress of a nation. The automotive industry comprises of the automobile and the auto component sectors. It includes passenger cars; light, medium and heavy commercial vehicles; multi-utility vehicles such as jeeps, scooters, motor-cycles, three wheelers, tractors, etc; and auto components like engine parts, drive and transmission parts, suspension and braking parts , electricals, body and chassis parts; etc.

In India, automotive is one of the largest industries showing impressive growth over the years and has been significantly making increasing contribution to overall industrial development in the country. Presently, India is the world's second largest manufacturer of two wheelers, fifth largest manufacturer of commercial vehicles as well as largest manufacturer of tractors. It is the fourth largest passenger car market in Asia as well as a home to the largest motor cycle manufacturer. The installed capacity of the automobile sector has been 9,540,000 vehicles, comprising 1,590,000 four wheelers (including passenger cars) and 7,950,000 two and three wheelers. The sector has shown great advances in terms of development, spread, absorption of newer technologies and flexibility in the wake of changing business scenario.

The Indian automotive industry has made rapid strides since delicensing and opening up of the sector in 1991. It has witnessed the entry of several new manufacturers with the state-of-art technology, thus replacing the monopoly of few manufacturers. At present, there are 15 manufacturers of passenger cars and multi-utility vehicles, 9 manufacturers of commercial vehicles, 16 of two/ three wheelers and 14 of tractor, besides 5 manufacturers of engines. The norms for foreign investment and import of technology have also been liberalised over the years for manufacture of vehicles. At present, 100% foreign direct investment (FDI) is permissible under the automatic route in this sector, including passenger car segment. The import of technology for technology upgradation on royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is also allowed under automatic route in this sector. The Indian automotive industry has already attained a turnover of Rs. 1,65,000 crore (34 billion USD) and has provided direct and indirect employment to 1.31 crore people in the country.

The growth of Indian middle class, with increasing purchasing power, along with strong macro-economic fundamentals have attracted the major auto manufacturers to Indian market. The market linked exchange rate, well established financial market, stable policy governance work and availability of trained manpower have also shifted new capacities and flow of capital to the auto industry of India. All these have not only enhanced competition in auto companies and resulted in multiple choices for Indian consumers at competitive costs, but have also ensured a remarkable improvement in the industry's productivity, which is one of the highest in Indian manufacturing sector.

The Department of Heavy Industry, under the Ministry of Heavy Industries and Public Enterprises, is the main agency in India for promoting the growth and development of the automotive industry. The department assists the industry in achievement of its expansion plans through policy initiatives, suitable interventions for restructuring of tariffs and trade, promotion of technological collaboration and up-gradation as well as research and development. The department is also concerned with the development of the heavy engineering industry, machine tools industry, heavy electrical industry, industrial machinery, etc.

The automobile sector recorded growth of 13.56% in 2006-07. During the year 2007-08 (April-December), the industry decelerated at 3.49%. The automobile exports crossed the US$ 1 billion mark in 2003-04 and increased to US$ 2.76 billion in 2006-07. The industry exported 15% of its passenger car production in 2006-07, 10% of commercial vehicles production, 26% three wheelers and 7% two wheelers. Similarly, during the year 2006-07, the auto component industry continued its high growth path and emerged as one of the fastest growing sector in Indian engineering industry by clocking 21% growth in output during the year. This industry crossed a total turnover of over US $ 15 billion (Rs. 64,500 crore), with exports of US $ 2.9 billion (Rs. 12,643 crore) during the year. Investment in the industry also grew by over Rs. 4500 crore during the year as the industry continued to invest in capacity enhancements and new greenfield sites to cope with the increasing demand. The auto component industry’s export growth was 15% in 2006-07. While, the total imports was US $ 3.3 billions (Rs. 14,644 crore). On the quality and productivity front, auto component industry maintained its leadership with more than 95% companies being certified as per the ISO 9000 system standards and more than 70% of the companies are certified as per the ISO/TS 16949 standards. It has also the distinction of having the maximum number of 11 Deming award winning companies.

In order to further accelerate and sustain advancements in the auto sector, the department has undertaken several policy measures and incentives. The most important being the announcement of the 'Auto Policy' of 2002, which aims to establish a globally competitive automotive industry in India and double its contribution to the economy by 2010. The policy seeks to set out the direction of growth for the sector and promote R&D therein so as to ensure continuous technology upgradation as well as building up of better designing capacities. It emphasizes on low emission fuel auto technologies and availability of appropriate auto fuels in order to take auto manufacturing to a self-sustaining level. Broadly, the objectives of the auto policy are to:-

• Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country



• Emerge as a global source for auto components



• Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing tractors and two-wheelers in the world



• Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry



• Conduce incessant modernization of the industry and facilitate indigenous design, research and development



• Steer India's software industry into automotive technology



• Assist development of vehicles propelled by alternate energy sources



• Development of domestic safety and environmental standards at par with international standards.

Another milestone in this field has been the launching of the National Automotive Testing and R &D Infrastructure Project (NATRIP) which aims to create core global competencies in automotive sector and facilitate its integration with the world economy. It seeks to develop 'state-of -the- art' testing, validation and R& D infrastructure in the country with a view to support the growth and development effort of the automotive industry to reach international levels. NATRIP envisages setting up of world-class and homologation facilities in India with a total investment of Rs. 1,718 crore within the three automotive hubs of the country. These are:- Manesar in Northern India; Chennai in Southern India; and Pune and Ahmednagar in Western India. The project largely aims at:-

• Creating critically needed automotive testing and validation infrastructure to enable the Government to usher in global vehicular safety, emission and performance standards



• Deepening of manufacturing in India by achieving high degree of value addition and enhancing employment potential in the country



• Facilitating convergence of India's strengths in IT and electronics with automotive engineering



• Enhancing India's global outreach in this sector by facilitating development and mass production of high technology driven, affordable and globally acceptable automotive products and by de-bottlenecking their exports and



• Removing the crippling absence of basic product testing, validation and development infrastructure for automotive industry.

Besides, the announcement of 'Automotive Mission Plan' for the period of 2006-2016 is a major step taken to make India a global automotive hub. The Mission Plan aims to make India emerge as the destination of choice in the world for design and manufacture of automobiles and auto components, with output reaching a level of US$ 145 billion (accounting for more than 10% of the GDP) and providing additional employment to 25 million people by 2016. It envisages increase in production of automotive industry from the current level of Rs. 169000 crore to reach Rs. 600000 crore by 2016. The Mission seeks to oversee the development of the automotive industry, that is, the present scenario of the sector, its broad role in the growth of national economy, its linkages with other key facets of the economy as well as its future growth prospects. This is involved in improving the automobiles in the Indian domestic market, providing world class facilities of automotive testing and certification as well as ensuring a healthy competition among the manufacturers at a level playing field.

The future challenges for the Indian auto 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, as well as overcoming infrastructural bottlenecks. It also involves stimulating domestic demand and exploiting export and international business opportunities. In all these, the role of the Government is of facilitating infrastructure creation, promoting the country’s capabilities, creating a favourable and predictable business environment, attracting investments and promoting R&D. While, the role of industry is primarily of designing and manufacturing products of world-class quality standards, establishing cost competitiveness, improving productivity of both labour and capital, achieving scale and R & D enhancing capabilities as well as showcasing India’s products in potential markets.

All such initiatives indicate that the Indian automotive industry has been emerging as a sunrise sector of the economy. It is not only meeting the growing domestic demands, but also gradually increasing its penetration in the international markets. It has been continuously restructuring itself and absorbing newer technologies in order to align itself to the global developments and realize its potentialities. Endowed with several advantages like low cost and high skill manpower; globally competitive auto-ancillary industry; established testing and R & D centres; production of steel at lowest cost; etc., the industry provide immense investment opportunities. This has instilled confidence in auto manufacturers to face international competition as well as improve quality standards of vehicles with safety norms in the wake of rapidly increasing traffic. Various policy incentives including time bound implementation of Automotive Mission Plan together with establishment of world class testing, homologation and certification facilities would ensure Indian automotive industry a distinct edge amongst the newly emerging automotive destinations of the world.

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