India auto market: Budget 2023 is on the horizon. Deliberation with stakeholders are on. The Finance Commission, taxpayers, businessmen, farmers’ groups and many other interested parties are sending suggestions to the Nirmala Sitharaman led ministry. Amidst all this, some developments in the last few months give us a hint about the trajectory of the ledger account. Certainly, a soaring economy will play a big role in defining the tilt of budget spending.
Auto Market: India pushed Japan to number 3
India has overtaken Japan in auto sales. In terms of total sales, India became the 3rd largest auto market in the world. Based on preliminary results, India sold 42.5 lakh vehicles. On the contrary, Japan sold only 42 lakh vehicles. According to Nikkei Asia, between January and November, only 41 lakh vehicles were sold. The impetus was provided by late year sales figures of Maruti Suzuki.
The number is still below pre-pandemic levels. In 2018, India’s auto sales were recorded at 44 lakhs, which declined in subsequent years. The first blow was dealt by Credit crunch and then Covid-19 worsened the scenario. Production and sales capacity remained subdued for the last few years. Meanwhile, the Modi government used the opportunity to tighten norms around green energy, which is reflected in the sales of hybrid vehicles registered by Society of Indian Automobile Manufacturers (SIAM).
These numbers are reflective of India’s emphasis on increasing manufacturing’s share in India’s GDP. Government wants manufacturing to comprise 25 per cent of GDP. This is important since services sector led growth is not enough to cater to India’s job market. Along with automobile manufacturing, toy and semiconductor manufacturing are also on the advent.
Also read: Private sector is geared up to shape India’s economic future
Good news in toy and semiconductor manufacturing
In December 2022, it was reported that in FY22, India’s toy exports were clocked at $326.63 million. It was more than 240 per cent increase from the base year of FY15, the year when the Modi Cabinet took charge. The export numbers are in a way a direct assault on Chinese dominance in the Indian market. The Indian domestic toy market used to be filled with Chinese toys.
To put a halt on this menace, India has been using Quality Control orders to phase out substandard Chinese toys. Along with that, 19 toy clusters have been approved to increase the share of indigenous toys in local as well as export markets. Resultantly, India’s imports of toys has reduced to below 33 per cent of pre-2015 level.
But, the Chinese threat is not limited to one domain. Covid-19 and the supply chain crisis in semiconductors also showed us that we need to have our own semiconductor manufacturing facility. Government has put in place a PLI Scheme for localising semiconductor production. Up until now, the results are satisfactory.
In September last year, Vedanta announced a humongous $20 billion investment for semiconductor production in Gujarat. Foxconn is also a partner. In the latest development, Anil Agarwal led group has signed pact with 30 Japanese firms. Vedanta estimates that it will be able to create business opportunities worth $40 billion for its partner firms. Various other companies are also at different stages of similar investments in chip manufacturing.
Also read: What may seem like a small step for Vedanta is a giant step for India in the semiconductor space
Private Space-tech on the rise
A large chunk of these chips is expected to be utilised locally. India is finally realising its space-tech dream. In 2019, NewSpace India Limited (NSIL) was established to transfer ISRO’s legacy of technical efficiency to the private sector. The government also launched IN-SPACE to make it easier for private companies to use Indian space infrastructure. The sector has witnessed more than 100 startups on the scene in the last few years. In 2022, India saw its first private rocket launch.
Now, Microsoft has joined hands with ISRO to empower Indian space-tech companies. According to a memorandum of understanding signed with ISRO, Microsoft will provide companies with technology tools and platforms, go-to-market support and mentoring. The support system will help companies scale their capabilities. Ultimate goal is to increase India’s contribution to the space economy. Currently, it is hovering around 2 per cent.
For the last one year or so, the news about global recession has shadowed India’s growth and budget prospects. With the smoke getting cleared, there is an incentive for the finance minister to focus more on these sectors and help them realise their potential. Ultimately, the budget has to ensure that the demographic dividend is fully utilised.
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