Steps including incentives for domestic capacity creation and policy for scrapping old vehicles will help Modi’s campaign to increase the share of manufacturing to 25% of GDP by 2022 from 16% now. Photo: AFP
Steps including incentives for domestic capacity creation and policy for scrapping old vehicles will help Modi’s campaign to increase the share of manufacturing to 25% of GDP by 2022 from 16% now. Photo: AFP

Modi’s ‘Make in India’ push seen propelled by auto production

Govt unveils plan that targets fourfold output growth; aims for the total value of vehicle-related production to reach as much as Rs18.9 trillion by 2026

Mumbai/New Delhi: Prime Minister Narendra Modi’s ‘Make in India’ campaign will be propelled by the nation’s auto industry with the goal of a fourfold growth in output by 2026 under a plan outlined on Wednesday.

The Indian government and motor industry aim for the total value of vehicle-related production to reach as much as 18.9 trillion by 2026, under the Automotive Mission Plan 2016-2026. The figure is the top-end of projections based on average gross domestic product (GDP) growth of 7.5% during the period. It includes contribution from sales of cars, trucks, tractors, motorcycles, scooters and components both in the local market and exports.

Steps including incentives for domestic capacity creation, a policy for scrapping old vehicles and a reduction in import duties on raw materials and intermediates are needed to reach the goal, the document presenting the plan said. If such measures are taken, they will help Modi’s campaign to increase the share of manufacturing to 25% of GDP by 2022 from 16% now—a policy packaged with a slick ‘Make in India’ website.

“The automotive industry can be termed as the mother of the manufacturing sector in an economy, as its fortunes directly impact the fortunes of several related manufacturing industries," the mission plan said. “The rapid growth of the Indian automotive industry will provide a strong fillip to the micro and small and medium industries of the country across multiple sectors."

Incentives

Low ownership of passenger vehicles and one of the fastest growing economies in Asia has encouraged auto makers from General Motors Co. to Toyota Motor Corp. to build factories and set up dealer networks across India. The industry in the year through March 2015 revived from a slump in sales. In the four months through July, local passenger vehicle deliveries climbed 7.5%, according to data from the Society of Indian Automobile Manufacturers.

Shares of Maruti Suzuki India Ltd, the nation’s largest car maker, have risen 21% this year, while the Sensex has dropped 7.4%.

The plan seeks the implementation of an inspection and certification regime that will address vehicular pollution and the rising number of accidents due to the poor condition of vehicles. It also says there is a need for an ‘End of Life’ policy for vehicles with scrapping centers across the country.

“A lot of work has to be done by the industry with support from the government to make it happen," said Pawan Goenka, executive director of Mahindra and Mahindra Ltd. “We need support from the government in terms of policy, credit policy, taxation, facilitation of infrastructure, ease of doing business, all of these things will have to come together." Bloomberg

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