Auto parts makers urged to cut imports
#GS3 #Economy #Imports #Manufacturing
- The Road Transport and Highways Minister speaking at the annual session of the Automotive Component Manufacturers Association of India (ACMA) have asked domestic automobile component makers to develop products locally and reduce dependence on imports.
Covering geopolitical risks:
- The trade war between the U.S. and China and the increasing tensions along the LAC between India and China threatens to disrupt the automobile supply chains.
- Many companies in China were either relocating or adding plants in other countries to cover the geopolitical risks.
- India’s attempt to cut its dependence on China for automotive parts could help India cover the possible geopolitical risks.
Boost to ‘Make in India’:
- The efforts to reduce imports would be supplemented by domestic manufacturing efforts. This could provide a boost to the Make in India programme and lead to the benefits of increased economic activity and employment opportunities.
Key sector for economic revival:
- The auto industry has been reviving faster than expected, mostly due to pent-up demand and people now preferring personal mobility over public transportation.
- This provides an avenue for economic revival in the midst of the current economic slowdown. Self-reliance in the sector would ensure its unimpeded growth.
Global automobile manufacturing hub:
- The presence of an integrated auto sector supply chain within India could help make India a top global automobile manufacturing hub. This would attract higher FDI into the sector and could also aid the export of automobiles from India.
- A production-linked incentive (PLI) scheme for auto and component makers is under consideration and this would promote and incentivize domestic production and help reduce imports.
- The scrappage policy is at an advanced stage of inter-ministerial discussions. This would help create a demand base for the automobile sector and incentivize investments into the sector
- Given that India relied on even imports of low-tech components like gearboxes, tubes and steering wheels, and given that there are no technological impediments for localisation of these components, such components should be identified and efforts should be made to localize production of such entities in the beginning. Subsequently, other categories of components where imports could be converted to local should be identified and promoted.
- While trying to increase domestic production all safety precautions need to be taken to ensure that there is no compromise on quality and safety.
- Apart from domestic efforts, there is also the need to explore a partnership with manufacturers from Japan, Europe, Korea and the U.S. to set up their manufacturing units within India.