Prime Minister Narendra Modi’s ‘Make in India’ campaign has a lot going in for the automobile manufacturing sector in the country. The outlining parameters state that India is to become the 2nd largest producer of steel in the year 2015. And steel is one of the most important constituent for automobile component manufacturing, which is one of the major growth drivers of the economy. Hopefully, with international manufacturers bringing world-class vehicles and cutting edge technologies in, Modi government’s plan to see the success of ‘Make in India’ will hold true.
Why shall international manufacturers invest in India?
The reasons are many and quite apparent really. The geographical location of India makes it a central hub for fast and easy exports to ASEAN, Japan, Korea and Europe thus adding to cost effectiveness of manufacturing and exporting from India. Also as mentioned earlier the high production of steel makes it cheaper to buy steel from Indian companies manufacturing locally.
The growing working population too encourages international automobile manufacturers to foresee huge demand potential for the car market. The cost effective availability of skilled and semi-skilled human labour is another attracting factor for foreign automobile manufacturers to set up shop here. As manufacturing units develop, so does the increase in R&D operations and investments in the equipment. Most of the manufacturers are already pumping in lot of money on this front, hence increasing the quality of the products continuously.
What are the stats?
With a massive turnover of USD 39.7 billion in the year 2012-13 is expected to rise to USD 115 billion by year 2020-21. Estimates now suggest that the Indian automobile market will become the 3rd largest in the world by the year 2016, and account to about 5% of the global vehicle sales in terms of numbers.
But what is most interesting is the expectation of becoming the 4th largest automobile manufacturer in the global market after the leaders China, United States and Japan. Also to note is the growth in the automobile component exports increased at a Compound Annual Growth Rate (CAGR) of 17% in the period of 2008-13, touching USD 9.7 billion in 2012-13.
Expected incentives to the automobile industry?
For manufacturers with R&D centres working for product development, a weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure shall be spared by the government. The is the concession excise duty benefit of 6% extended to March 31, 2015 that may be utilised by manufacturers supplying batteries to producers of electrically operated vehicles. Also in favour of electric car manufacturers, an exemption from basic customs duty on lithium-ion automotive batteries that are used in the manufacture of hybrid and electric vehicles has been levied.
Export policies such as export promotion capital goods scheme, duty remission scheme and focus product scheme will be easing of burden in the export of vehicles and components. State governments too are providing benefits like subsidised land cost, relaxation in stamp duty exemption on sale and lease of land, power tariff incentives, concessional rate of interest on loans, investment subsidies, tax incentives, backward areas subsidies and special incentive packages for mega level projects to create more jobs and lure investments on their level.
