base of automobile industry

1. Abstract
The automobile industry is a prominent part of the manufacturing sector and considered to be
an indicator of economic development of any country. It is also a technology and knowledge
intensive industry because it demands high performance and quality parts. In India also the
automobile industry occupies a prominent place due to its deep forward and backward linkages
with many key segments of the economy. This industry has a strong multiplier effect and is
capable of being the driver of economic growth. The performance of the automobile industry
can be correlated to the health of the economy. A sound transportation system, to which the
automobile industry is linked, plays a pivotal role in the country’s rapid economic and
industrial development. The prime objective of this paper is to analyse the growth pattern and
economic impact of automobile industry on Indian economy.
The automobile industry is one of the most important drivers of economic growth of India and
one with high participation in global value chains. The growth of this sector has been on the
back of strong government support which has helped it carve a unique path among the
manufacturing sectors of India. The automobiles produced in the country uniquely cater to the
demands of low- and middleincome groups of population which makes this sector stand out
among the other automobile-producing countries. This chapter analyzes the roles of
government policy, infrastructure, and other enabling factors in the expansion of the
automobile and automotive component sectors of India. In 2017, India became the world’s
fourth largest automobile market, and the demand for Indian vehicles continues to grow in the
domestic and international markets. To meet the future needs of customers (including the
electrical vehicles) and stay ahead of competition, manufacturers are now catching up on
upgradation, digitization, and automation
Keywords: automobile, India, export, production.

2. Introduction
India has become a fast-growing auto market over the past two decades. It has witnessed
revolutionary changes in the management systems and manufacturing innovations of the world
automotive industry. India is fast becoming powerful force in the global automobile industry,
and has the strength to sustain leadership and growth in the face of the global trading order.
The growth in Indian economy encounters the growth in industrial production. People today
are more pragmatic before acquiring the automobile. The automotive manufacturers, first-time
car buyers give them the opportunity to create positive brand image which definitely could be
reflected in coming years because consumers could repeat car purchasing. The small car market
has changed rapidly due to the fierce competition and advanced technologies. Therefore, it
requires the automotive manufacturers and car dealers to understand the ’ preference on time
and take fast actions to respond to market changes quickly. Now-a-days new cars are launched
very frequently with unique and novel features. So, it would be very interesting to know ’
preference in today’s fast-changing car market. While manufacturing a car, several features are
incorporated into it. Features like luxury, looks, uniqueness, car accessories, technical
superiority, etc. could play an important role in purchasing decision of car.. India is one of the
most important emerging car economies in the world today. The Indian automobile industry –
comprising of the automobile and the automotive components segments – is one of the key
drivers of economic growth of India. Being deeply integrated with other industrial sectors, it is
a major driver of the manufacturing gross domestic product (GDP), exports, and employment.
This sector has grown on account of its traditional strengths in casting, forging and precision
machining, fabricating (welding, grinding, and polishing) and cost advantages (on account of
availability of abundant low-cost skilled labor), and significant foreign direct investment (FDI)
inflows. India was the sixth largest producer of automobiles globally with an average annual
production of about 29 million vehicles in 2017–2018, of which about 4 million were
exported.2 India is the largest tractor manufacturer, second largest two-wheeler manufacturer,
second largest bus manufacturer, fifth largest heavy truck manufacturer, sixth largest car
manufacturer, and eighth largest commercial vehicle manufacturer.
India became the fourth largest auto market in 2018 with sales increasing 8.3 per cent year-on-
year to 3.99 million units. It was the seventh largest manufacturer of commercial vehicles in
2018.The Two Wheelers segment dominates the market in terms of volume owing to a growing
middle class and a young population. Moreover, the growing interest of the companies in
exploring the rural markets further aided the growth of the sector. India is also a prominent

3. auto exporter and has strong export growth expectations for the near future. Automobile
exports grew 14.50 per cent during FY19. It is expected to grow at a CAGR of 3.05 per cent
during 2016-2026. In addition, several initiatives by the Government of India and the major
automobile players in the Indian market are expected to make India a leader in the two-wheeler
and four-wheeler market in the world by 2020.
Objectives
 To analyse the growth of Indian automobile industry.
 To study the economic impact of growth of automobile industry on Indian economy.