India’s automotive industry is currently at a crucial turning point, where it has the opportunity to grow beyond domestic production and establish itself as a strong player in the global value chain (GVC). Despite being the fourth-largest automobile producer in the world, India’s participation in the global automotive component trade is still limited, holding only a 3% share of the globally traded market. The report by NITI Aayog, in collaboration with CRISIL, highlights the gaps, opportunities, and necessary policy interventions to boost India’s position in the international automotive sector.
The global automotive landscape has seen significant changes over the last few decades, with increasing emphasis on electric vehicles, digital technologies, and sustainability. While countries like China, the US, Japan, and Germany dominate the global component trade, India lags primarily due to structural cost disadvantages and limited integration in high-precision components like engines and transmission systems. India’s near-neutral trade balance in auto components, with imports and exports each valued at around $20 billion, indicates its largely self-contained trade structure. However, this also reflects the country’s limited engagement with the global market in high-value segments.
The report sets a clear vision for the future: India can increase its automotive component production to $145 billion and triple its exports to $60 billion by 2030. This would result in a trade surplus of around $25 billion and generate 2 to 2.5 million new jobs. To achieve this, India needs to overcome a cost disadvantage of nearly 10% compared to countries like China, which benefits from deeply integrated supply chains and lower material and equipment costs. Other issues like high capital costs, tax burden, and limited R&D capacity further weaken India’s global competitiveness.
Several government initiatives have already been launched to strengthen the sector. Schemes like the Production Linked Incentive (PLI), Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), and PM e-Drive aim to enhance domestic manufacturing and push the country toward electric mobility. These are supported by a range of fiscal and non-fiscal incentives for component manufacturing, skill development, R&D, and infrastructure. Notably, there’s an emphasis on building a globally competitive Indian brand through quality standards, branding support, and international collaboration.
The report also emphasizes the importance of aligning India’s production with emerging global trends such as Industry 4.0 technologies, including automation, AI, and additive manufacturing. Smart factories, digital twins, and predictive analytics are highlighted as critical tools for improving manufacturing efficiency and flexibility. Furthermore, the integration of the automotive sector with electronics, semiconductors, and IT reflects its growing complexity and cross-sectoral impact.
On the policy front, a mix of fiscal incentives like capital expenditure support for tools and dies, and non-fiscal measures such as promoting ease of doing business, supplier development, and tech collaborations have been recommended. Encouraging foreign joint ventures and exploring Free Trade Agreements (FTAs) are seen as pathways to strengthen India’s position in global trade networks.
The automotive component sector holds the key to India’s deeper integration into global manufacturing. With the right reforms and timely execution, India can not only become a major exporter but also transform into a global hub for advanced and sustainable automotive manufacturing. This growth will not only boost economic development but also contribute significantly to job creation and technological advancement in the country.
