India’s Path to Tripling Automotive Component Exports by 2030

Vision for Growth in Automotive Exports

• India aims to triple its automotive components exports to $60 billion in the next five years, positioning itself as a global leader in the sector.
• Achieving this goal would result in a trade surplus of nearly $25 billion and increase India’s share in the global automotive components value chain from 3% to 8%.
• The growth is expected to create 22.5 million new jobs, bringing the total direct employment in the sector to 34 million.

Policy Recommendations for Achieving Growth

• Strategic and Focused Policy Initiatives: The NITI Aayog report stresses the need for high-value automotive manufacturing and strong policy support.
• Production Support Scheme: The scheme would include:
  • Operating expenditure support for scaling up manufacturing of specific components.
  • Capital expenditure support for tools and dies required in manufacturing.
• Non-Fiscal Interventions: These include:
  • Business improvement support to enhance global competitiveness.
  • Promotion of joint ventures and free trade agreements (FTAs) to foster international collaborations.
  • Adoption of Industry 4.0 technologies to improve manufacturing efficiency.
  • Implementation of enhanced quality standards to meet global demands.

Focus on Research & Development (R&D)

• The report emphasizes the need for a vibrant R&D ecosystem in the auto components sector.
  • Strategic R&D support with financial incentives across product categories is recommended.
  • Building globally competitive Indian auto component manufacturers requires continuous innovation through R&D.

Encouraging Skilled Workforce and Global Talent

• To support innovation, India should implement incentives for skilled foreign nationals to come to India, alongside initiatives to retain highly skilled Indians.
  • The NITI Aayog suggests offering incentives similar to China’s Thousand Talents Program, such as:
    • Right to purchase residence for foreigners.
    • Streamlined visa processes.
    • Guaranteed long-term employment opportunities.

Fiscal Support and Reassessing Returns from Government Schemes

• NITI Aayog noted the ongoing support from various government schemes, including:
  • FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles).
  • PM EDRIVE (PM Electric Drive Revolution in Innovative Vehicle Enhancement).
  • Production-linked incentive (PLI) for auto components.
• Suman Bery, NITI Aayog Vice-Chairman, stressed the importance of reflecting on the returns from these schemes, ensuring that India receives a reasonable tax return flow within a reasonable timeframe.

Addressing Competition and Localisation

• While localisation remains crucial, the report advocates for a balance with competition to drive innovation.
• India must rethink its competition policy to stay at the frontier of the automotive sector.
• Local champions of the automotive industry should not be shielded indefinitely; instead, policies should encourage competition and innovation.

BS