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Incentives For Auto Sector To Boost Exports Planned By India: Reuters Report

Incentives For Auto Sector To Boost Exports Planned By India: Reuters Report
With the aim of doubling of exports of vehicles and components in the next five years, the Indian government is preparing to provide a host of incentives to the auto industry in the country, says a report published by news agency Reuters based on information from four sources with direct knowledge of the matter.

The report quoted sources saying that feedback from auto industry groups on the initial proposal has been sought by the Department of Heavy Industries (DHI) of the Indian government.  According to sources, the incentive scheme indicates the government planning to offer incentives to auto companies over five year period to increase local production and procurement for export purposes.

The sales value of vehicles or components would form the basis for the scale of incentives and certain conditions will have to be met by eligible companies which include a minimum revenue and profit threshold as well as presence in at least 10 countries, the Reuters report said.  The government is yet to decide on the type of incentives to be offered.

There was no comment available from the DHI.

This new policy measure by India, according to analysts, is a part of the country’s efforts to develop ‘champion’ sectors which can attract investment, generate jobs and boost manufacturing. This is also a
part of the call to create a self reliant India given by the Indian Prime Minister Narendra Modi.

According to a senior government official, export promotions is the aim of the Indian government and sectors such as autos and textiles, have already been identified for which incentive plans are being designed.

“For autos the government has engaged with various stakeholders. We have to see what needs to be done in the global context,” said the official. There is a plan to give a “big push” to the sector even though talks are in early stages and details have not been finalized yet, the official added.
Led by companies including Ford Motor, Hyundai Motor, Maruti Suzuki, Volkswagen and Bosch which analysts say stand to gain the most, exports from the auto sector of India touched $27 billion in the fiscal year ending March 2019.

However what is worrying analysts is the current bad state of demand for auto in the globe because of the novel coronavirus pandemic and it might be quite some time before the auto sector demand can be revived.

Vinay Piparsania, consulting director, automotive, at Counterpoint Research, in order to be successful in its efforts to double exports from the auto sector, the Indian government has to ensure that the proposal is not complicated by too many conditions and remains exclusive of sales targets for companies.

“Having a liberal trade policy will allow companies to bring in new and global technologies which will increase their scale and India’s competitiveness as an export hub,” he said.
According to sources, the designing of the initial scheme is targeted at large companies which I n turn will prove beneficial for smaller players in the supply chain which will enhance the competitiveness of the auto sector as a whole.


Christopher J. Mitchell

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