Indian Government Forecasts Up to $10B in Auto Sector Investment by 2023

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In a late December report, the Indian government said it forecast the Indian automotive sector to attract between U.S. $8 billion and $10 billion in local and foreign investment by 2023.

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The Year End Review 2018 by the Ministry of Heavy Industries & Public Enterprises pointed out the sector had attracted $16.5 billion in foreign direct investment (FDI) between April 2000 and December 2016.

But the 2023 target may not be met if the government does not resolve the contentious issue of steel import rules soon.

Last August, the Indian Steel Ministry announced import rules for high-grade steel products, stipulating that foreign steelmakers must get Indian certification for high-grade steel products being used by Indian manufacturers. The Feb. 17 is fast approaching, but automakers have already registered their protests, saying they will not comply as they needed more time to do so.

The auto industry has dubbed the import rules as stringent, and though it is for specific high-grade steel products coming in from Japan and South Korea, they are used for vital auto components.

A Reuters report said India’s Heavy Industries Minister had written a letter in early January to his Steel Ministry counterpart, pointing out that the shipments of the auto component industry had started getting impacted. He voiced concerns in the letter that this “posed a significant risk of production stoppage of the whole automobile industry in the immediate future.”

Another issue which the minister pointed out was that if the government were adamant about imposing the new tax, auto manufacturers would simply stop importing steel and import the entire component itself, which would be detrimental to the “Make In India” plans of the government.

At a meeting mid-January between automakers’ representatives and government officials, the former pointed out that the new steel import norms were “a unrealistic protectionist measure” aimed at encouraging local steelmakers that could slow down manufacturing. Indian steelmakers did not manufacture special-grade steel, which is why Indian auto companies looked to other countries to fulfill this need.

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Indian automakers are seeking a year’s extension to comply with the new norms; now the ball is in the government’s court.

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