Driving Growth: The Significance of India's Automotive Sector

The automotive industry in India plays a vital role in the country's economy, serving as a major pillar of growth. With strong backward and forward linkages, it contributes significantly to the overall development.

In recent years, the auto sector has witnessed considerable progress due to liberalisation efforts and strategic policy interventions. These initiatives have fostered a dynamic and competitive market, attracting new players and -driving capacity expansion within the automobile industry. As a result, there has been a substantial increase in employment opportunities, with the sector providing direct and indirect livelihoods to over 19 million people. The automotive industry's contribution to the national GDP has risen impressively from 2.77 per cent in 1992-93 to around 7.1 per cent currently.

Within the Indian automobile market, two-wheelers hold the largest market share, accounting for approximately 77 per cent, followed by passenger cars at 18 per cent during the 2021-22 period. Among passenger cars, the market is predominantly dominated by small and midsized vehicles. Furthermore, the export of automobiles has witnessed substantial growth, with the total number of exported vehicles increasing from 4,134,047 in 2020-21 to 5,617,246 in 2021-22, reflecting a significant positive growth rate of 35.9 per cent. While in FY23 it increased by 15 per cent on a yearly basis.

The electric vehicle (EV) market in India is also on the rise, projected to reach Rs 50,000 crore (USD 7.09 billion) by 2025. This growth can be attributed to factors such as rising middleclass incomes and a growing youth population, leading to increased demand for vehicles. Foreign direct investment (FDI) has played a crucial role in the development of the automobile sector in India. The sector attracted equity inflows from FDI totalling USD 33.77 billion, accounting for 5.48 per cent of the total equity FDI during that period.