The Indian Automotive Industry after de-licensing in July 1991 has grown at a spectacular rate at an average of 17% for last few years. The industry has now attained a turnover of Rs. 1,65,000 crores (34 Billion USD) and an investment of Rs. 50,000 crores. Over Rs. 35,000 crores of investments is in pipeline. The industry is providing direct and indirect employment to 1.31crore people. It is also making a contribution of 17% to the kitty of indirect taxes. The export in automotive sector has grown on an average CAGR of 30% per year for the last five years. The export earnings from this sector are 4.08 billion USD out of which the share of auto component sector is 1.8billion USD out of which the share of auto component sector is 1.8billion USD during the year 2005-06.
Even with this rapid growth, the Indian Automotive Industry's contribution in global terms is very low. This is evident from the fact that even though passenger and commercial vehicles have crossed the production figure of 1.5million in the year 2005-06, yet India's share is about 2.37% of world population of 66.46 million passenger and commercial vehicles. Indian automotive export constitutes only about 0.3% of global automotive trade.
It is a well accepted fact that the automotive industry is a volume driver industry and certain critical mass is a pre-requisite for attracting the much needed investment in R&D and New Product Design and Development. R&D investment is needed for innovations which are the life-line for achieving and retaining the competitiveness in turn depends on the capacity and the speed of the industry to innovate and upgrade. The most important indices of competitiveness are productivity of both labor and capital.
India with its rapidly growing middle class (450 million in 2007 as per NCAER Report), market oriented stable economy, available of trained manpower at competitive cost, fairly well developed credit and financing facilities and local availability of almost all the raw materials at a competitive cost has emerged as one of the favorite investment destinations for the automotive manufactures.
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