Automotive Industry Set for Global Competition
March 2011

Automotive Industry Set for Global Competition

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The growth in Indian Automotive Industry has grown at a CAGR of over 14%. The size of the automotive sector in 2008-09 was estimated to be around `1,910 billion. It is expected that an additional 2- 2.5 million employment opportunities per annum will be created in the next decade

The liberalisation of the Indian industry saw significant growth in the Indian Automotive Industry. Today, the Indian Automotive Industry is a significant contributor to the Indian economy, contributing nearly 5% to the country's GDP and about 17-18% to the kitty of indirect taxes to the Government, while investment outlay stood over `83,500 crore in 2008-09. 

The evolution translated into a clustered growth owing to high dependence of the industry on integrated supplier network. The nucleated growth further gained support from favourable policies of those particular States wanting to promote industrialisation in their respective regions. As a result, certain key centres of production with high concentration of Auto-Original Equipment Manufatures (OEMs) and Auto-component manufacturers emerged, namely Pune, Gurgaon, Chennai and Bangalore supported by upcoming smaller clusters like Pitampur and Pantnagar.

All this has been in keeping with the Government of India's Automotive Mission Plan (AMP) 2006 – 2016 which envisaged that “India would emerge as the destination of choice in the world for the design and manufacture of automobiles and auto-components. The Output of the automotive sector would be US$ 145 billion contributing to more than 10% of India' GDP and providing employment to 25 million persons additionally by 2016.”

Generating Employment for the Youth

The Automobile segment, comprising of the OEMs, is at the topmost Tier of the Automotive Industry with a wide network of Tier I, II, III level suppliers supporting the OEMs for end product production. In terms of activity, manufacturing is the most key function in the Automobile segment, owing to nearly 60-70% of the manpower engaged in this activity at the manufacturer's end (direct employment). Indirect employment generated by this sector is considerable as personnel are employed in functions such as sales, finance, insurance, etc.

Further, the automotive landscape in India has several underlying support systems which, though not directly linked to the industry, are support areas or “enablers” of growth. Key enabler segments for the core segments of the Automotive Industry include auto insurance, financiers, mechanics, and auto dealers etc. The enabler segments are associated with providing indirect employment to personnel in the Auto Industry and employment in these industries constitutes about 60% to 70% of the total employment in the Automotive Industry in India.

The automotive industry, on account of its backward and forward linkages, is a significant generator of employment – both direct and indirect. It is estimated that the Indian Automotive Industry provides direct and indirect employment to over 13 million people.

Demand for minimally skilled people, which includes Industrial Training Institute (ITI) diploma holders and school educated workmen is expected to be around 12~15 lakh per annum; demand for manpower at the next level

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