Influence of government policies on industry development: The case of India's automotive industry

The automotive industry in India has come a long way from its nascent state at the time of India's independence in 1947 to its present day dynamic form. As compared to the production of mere 4,000 vehicles in 1950, the production of the industry crossed the historic landmark of 10 million vehicles in 2006. Today, the industry produces a wide range of automobiles and auto-components catering to both the domestic as well as foreign markets. The development of the industry has been shaped by the demand on the one hand and the government interventions on the other; the influence of the latter being considerable. The evolution of India's automotive industry is identified to have occurred in four phases. In the first (1947-1965) and second phase (1966-1979), the important policies identified were related to protection, indigenisation and regulation of the industry. On the one hand, these policies helped India to build an indigenous automotive industry, while on the other it led to unsatisfactory industry performance. In the third phase (1980-1990), the single most important policy identified was the one with regard to relaxation in the means of technology acquisition. The foreign competition inducted into the industry transformed its dynamics. Lastly, in the fourth phase (1991 onwards) the liberalisation with regard to foreign investment had a significant influence on the Indian automotive industry as we see it today. This work traces the evolution of the automotive industry from its inception to present day and identifies the important policies made by the Indian government. The work also studies the influence of important policies on the development of the industry. --India,Automotive,Industrial Policy,Government Policy,Government Influence

Influence of Government Policies on Industry Development: The Case of India's Automotive Industry

The automotive industry in India has come a long way from its nascent state at the time of India’s independence in 1947 to its present day dynamic form. As compared to the production of mere 4,000 vehicles in 1950, the production of the industry crossed the historic landmark of 10 million vehicles in 2006. Today, the industry produces a wide range of automobiles and auto-components catering to both the domestic as well as foreign markets. The development of the industry has been shaped by the demand on the one hand and the government interventions on the other; the influence of the latter being considerable. The evolution of India’s automotive industry is identified to have occurred in four phases. In the first (1947-1965) and second phase (1966-1979), the important policies identified were related to protection, indigenisation and regulation of the industry. On the one hand, these policies helped India to build an indigenous automotive industry, while on the other it led to unsatisfactory industry performance. In the third phase (1980-1990), the single most important policy identified was the one with regard to relaxation in the means of technology acquisition. The foreign competition inducted into the industry transformed its dynamics. Lastly, in the fourth phase (1991 onwards) the liberalisation with regard to foreign investment had a significant influence on the Indian automotive industry as we see it today. This work traces the evolution of the automotive industry from its inception to present day and identifies the important policies made by the Indian government. The work also studies the influence of important policies on the development of the industry

Benevolent benefactor or insensitive regulator? : tracing the role of government policies in the development of India's automobile industry

For more about the East-West Center, see http://www.eastwestcenter.org/The impressive and sustained growth of India's automobile industry in recent years has catapulted it into the league of the world's top-seven producers of four-wheelers. In the past decade, its exports have surged more than 25 percent a year on average. The turning point was arguably the 1991 policy of economic liberalization, but the impact of the reforms might have been subdued, if the Government of India had not played a pivotal role in the industry's evolution. This apparent "paradox" may be the key to understanding why the industry has adjusted so quickly to globalization, even though economic reforms began relatively late. This study identifies the main thrusts of policy regimes for the automobile sector since 1947, which began in an overregulation mode in the early period of independence. Nonetheless, the government consciously attempted to create and sustain favorable "innovation systems" at national, regional, and sectoral levels. Especially since 1991, many policy initiatives have benefited the industry and helped it reach the growth path it is following today