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Policy review may hurt Indian auto industry - Views on News from Equitymaster
 
 
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  • Sep 3, 1999

    Policy review may hurt Indian auto industry

    According to newspaper reports, the commerce ministry has decided to review the import policy in order to allow import of new passenger car models.

    Although the decision has been taken on the back of demands of some auto companies, which want to increase their product range to cope up with the slack in demand, it could have grave implications for the automobile industry as a whole.

    Already, the Indian auto industry is facing the grim post WTO scenario wherein import restrictions will be more or less done away with. This has greatly increased the potential competition for the Indian auto industry in the future. The move to permit imports of new cars will only add to India's dependence on imports as against the need to develop a vibrant domestic auto industry.

    If auto companies were permitted to import new cars, they would be tempted to defer investments in India, as it would be more economical for them to service Indian markets from their Southeast Asian and other bases. This would adversely affect the growth and development of the Indian industry in the near to medium term. Therefore, if at all, any such decision is taken, the government must take measures to ensure that there is no adverse fall out on the development of the local industry.

    One positive fall out of the move will be that Indian manufacturers will get a preview of the things to come in the post WTO era. This will help them gauge the challenges that lie ahead and accordingly plan their actions to take on the competition.

     

     

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