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| A driver of growth | | The auto components sector spurs industrial output |
| Business Standard / New Delhi Aug 31, 2010, 00:42 IST |
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The Automotive Component Manufacturers Association of India can look back to the 50 years whose completion it has just celebrated with a good degree of satisfaction, and project with some authority its vision for the future. It has emerged as the bronze medalist among the country’s most globally competitive sectors, after software and pharmaceuticals, and projected an ambitious trajectory for the next 10 years to 2020. Its turnover should reach $110 billion by then from the current (2009-10) $22 billion. As this implies a compound annual growth rate of 17.5 per cent, compared to the 21 per cent achieved in the last five years (2005-10), the goal is well within reach. The aim also is to take exports to $29 billion from the current $3.8 billion, which assumes a compound annual growth rate of 22.5 per cent — about the same as achieved in the past five years. In the process, the sector expects its share of GDP to go up from the current 2.1 per cent to 3.6 per cent, making it an engine of growth for the economy.
But more than these numbers, it is the quality of growth that is important. Most of it will be domestic demand driven and with a far lower reliance on North America for exports than in the case of software. Europe and Asia currently account for two-thirds of exports with North America just over a fifth. So, the risks to growth posed by global upheavals, of the sort seen in the last two years (component export growth was zero in 2009-10), will be lower. What is more, the sector expects to add a million skilled jobs in the next 10 years, which stands up well to the three million currently employed by software and BPO. If the attack on poverty is best delivered through the creation of skilled, blue-collar jobs, then auto and auto components are its key engine. Above all, the sector has broken the old jinx of India being a loser in manufacturing. In the five years to 2008, auto component firms accounted for a majority of the Indian winners of the coveted Demming prize of Japan which is a hallmark of excellence in manufacturing. In the process, the sector has laid the foundations for India to emerge as the global manufacturing hub for small cars.
What is perhaps most exciting is that the sector is asking the government for very little to deliver the vision that it has set for itself. Its primary concern is to fund the big-ticket investments that will enable it to meet burgeoning demand and reap the benefits of cost and quality that come with scale. Its biggest concern is the cyclical nature of the demand scenario that it has to live with, but here also the fluctuations in India will be less than in the rest of the world as both India and China are expected to grow more consistently than any other geography. It is asking the government for only the very basics like better roads and power, and it is safe to assume that it will deliver on its vision if on roads and power the situation remains no worse than what it is now.
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