NITI Aayog Report on Strengthening Automotive Sector

Context

NITI Aayog has recently released a comprehensive report titled “Automotive Industry: Powering India’s Participation in Global Value Chains.” This report provides an in-depth analysis of India’s automotive sector, highlighting both opportunities and challenges, and outlines strategies to enhance India’s global competitiveness in the automotive market.

Introduction to the Report

The report was launched by Vice Chairman Suman Bery and CEO BVR Subrahmanyam of NITI Aayog. It emphasizes India’s potential to become a key player in global automotive markets, leveraging initiatives like ‘Make in India’ and its cost-competitive workforce. The global automotive components market is valued at $2 trillion, with India holding a share of approximately $70 billion.

Global and Indian Automotive Landscape

Global Trends

• Global Production and Trade: In 2023, global automobile production reached about 94 million units, with the automotive components market valued at $2 trillion. The export share of these components was nearly $700 billion.
• Emerging Trends: The industry is shifting towards electric vehicles (EVs) due to consumer demand and regulatory pressures. Battery production hubs are emerging in Europe and the U.S., creating new investment opportunities.

Indian Automotive Sector

• Production and Market Presence: India is the fourth-largest automobile producer globally, producing nearly six million vehicles annually. It has a strong presence in both domestic and export markets, particularly in small cars and utility vehicles.
• Challenges: Despite its production volume, India holds only a 3% share in the global automotive component trade. Key challenges include high operational costs, infrastructural deficits, and insufficient R&D investment.

Challenges Facing India’s Automotive Sector

• Operational Costs: Higher raw material costs, steeper import duties, and increased freight costs compared to competitors like China.
• Infrastructure and R&D: Limited infrastructure and insufficient investment in research and development hinder India’s competitiveness.
• Global Value Chain Integration: Low integration into global value chains restricts India’s ability to participate fully in international markets.

Proposed Interventions for Growth

Fiscal Interventions

• Operational Expenditure Support: To help scale manufacturing operations efficiently.
• Skill Development Initiatives: Building a skilled workforce to enhance productivity.
• R&D Incentives: Encouraging innovation and product differentiation.
• Cluster Development: Promoting collaboration among firms through manufacturing clusters.

Non-Fiscal Interventions

• Industry 4.0 Adoption: Encouraging the use of AI, ML, IoT, and robotics to improve manufacturing efficiency.
• International Collaborations: Fostering partnerships to enhance global market access.
• Regulatory Simplification: Streamlining regulatory processes to improve the ease of doing business.

Vision for 2030

Growth Targets

• Component Production: Increase domestic production to $145 billion.
• Export Growth: Triple exports from $20 billion to $60 billion.
• Employment Generation: Create 2-2.5 million new jobs, bringing total employment to 3-4 million.

Strategic Objectives

• Trade Surplus: Achieve a trade surplus of around $25 billion.
• Global Value Chain Share: Increase India’s share in the global automotive value chain from 3% to 8%.

Conclusion

NITI Aayog’s report underscores India’s potential to become a global leader in the automotive industry. Achieving this goal requires focused efforts from both the government and industry stakeholders. By addressing existing challenges and leveraging proposed interventions, India can enhance its competitiveness, attract investments, and build a robust automotive sector capable of leading the global value chain.

Source: AIR

UPSC Mains Practice Question

Discuss the present status, challenges, and policy measures required to strengthen India’s automotive sector in the context of global trends.

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