FDI Inflows to Automobile Industry

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FDI Inflows to Automobile Industry have been at an increasing rate as India has witnessed a major economic liberalization over the years in terms of various industries. The automobile sector in India is growing by 18 percent per year.

The Automobile Sector in India-

The automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. This has contributed largely in making India a prime destination for many international players in the automobile industry who wish to set up their businesses in India.

The automobile industry in India is growing by 18 percent per year. The automobile sector in India was opened up to foreign investments in the year 1991. 100% Foreign Direct Investment (FDI) is allowed in the automobile industry in India. The production level of the automobile sector has increased from 2 million in 1991 to 9.7 million in 2006 after the participation of global players in the sector.

Advantages of FDI in the Automobile Sector in India

The basic advantages provided by India in the automobile sector include, advanced technology, cost-effectiveness, and efficient manpower. Besides, India has a well-developed and competent Auto Ancillary Industry along with automobile testing and R&D centers. The automobile sector in India ranks third in manufacturing three wheelers and second in manufacturing of two wheelers.

Opportunities of FDI in the Automobile Sector in India

Opportunities of FDI in the Automobile Sector in India exist in
  • Establishing Engineering Centers
  • Two Wheeler Segment
  • Exports
  • Establishing Research and Development Centers
  • Heavy truck Segment
  • Passenger Car Segment

Important Aspects of FDI in Automobile Industry

  • FDI up to 100 percent, has been permitted under automatic route to this sector, which has led to a turn over of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry
  • The manufacturing of automobiles and components are permitted 100 percent FDI under automatic route
  • The automobile industry in India does not belong to the licensed agreement
  • Import of components is allowed without any restrictions and also encouraged
Last Updated on 4/23/2011