RESEARCH PROPOSAL TOPIC: THE EMPIRICAL STUDY OF AUTOMOBILE POLICY OF INDIA COMPARED TO AUTOMOBILE POLICY OF INDIA.

FROM: GAURAV RANA ROLL NO: 3056, TY (b) Symbiosis School of Economics India has been one of the fastest growing economies from the last year few years. But still have a negative effect of policies followed till 1990s. After globalisation takes place in 1991, economic reforms start taking place in India when we gradually open our economy for foreign companies. A huge foreign investment through many institutes or directly makes its way to boost the Indian economy. The main question raise after this was does India did well in this era in comparison to other nations. After this major change in foreign policy, an increasing confidence and demand in automobile sector can be seen due to its long term potential and huge market. It helps also India to emerge as manufacturing hub at global platform. The automobile industry after 1991 era plays a curious role in growth of Indian economy. But is still have some effects of policies reforms in compared to nation, china quickly change itself in marketable conditions Pre-globalisation, Passenger car market was ruled by few car makers like Maruti Suzuki, Tata motors, Hindustan motors, force motors and premier padmini. A commercial vehicle was dominated by Tata motors, Mahindra & Mahindra and Ashok Leyland and Bajaj auto ruled the 2 wheeler market segment. If we talk about its contribution to GDP it was just only 3.5% and import tariff rate was 152% which was main hurdle of any individual for seeing a dream to park a car in his lawn.

This paper attempts to examine the changing aspects in favour of automobile sector post globalisation which was following: 1. The overview of policies reforms (1980-2010) 2. Role of government while making policies

3. The overview of china automobile policy (1978-2010) 4. Parameters to check Indian automobile growth 5. Comparison between economy of India and china situation 6. India or china- which is better? 7. Problems in India regarding automobile industry 8. The recommendation for future 9. Plans for future

(Table of content)

Research Proposal...................................................................................... Declaration................................................................................................. Acknowledgment....................................................................................... 1. Introduction to Indian Automobile Industry..............................................................................

Current status of Indian Automobile industry

2. Role of government policies in Indian automobile Industry........................................... Need for Effective Automobile industrial policy 3. Auto policies Review (1980 2010)................................................................................
Modernisation program Promotion of exports Broad banding Polices Liberalisations 1991 Review of policies in 2010

4. Parameters to check growth in production................................................................... Two wheelers production Commercial vehicle Passenger cars Increasing Exports Market share of each segment

5. Reviewing Auto policies of china................................................................................... Proliferation phase ( 1978-1994) Concentration phase ( 1994- 2010) Auto Policy -2010

6. Indian Automobile Policies v/s China Automobiles Policies..................................................

Comparison between India and China situations India v/s china which economy is better? Problems prevailing in both nations Recommendation to Indian Automobile Policy

7. Automotive Mission Plan (2006-2016)............................................................................... 8. Conclusions...................................................................................................................... 9. References....................................................................................................................

Studying the Various Auto Policies of India and China and its Possible Impact on Automobile Industry

1. Introduction
Automobile sector is the main wheel of any economy to run its administration. After china, India is the second largest producer of automobiles in Asia. In India automobile sector is ruled by many domestic and foreign players. The current level of production is 19, 26,484 at 2009-10 which was quite high form 10,000 in 1950s. During the early stages of economy, the automobile sector not has any importance but after several reforms automobile sector start contributing large number of income to GDP. The government took many economic reforms and deregulation changes in polices towards the automobile sectors. The reforms include the technology up gradation allowed to take from foreign countries by domestic players in 1980s. First merger of automobile company was setup in 1983 as Maruti and Suzuki to produce first Indian small car. Suzuki was Japanese based company allowed to set his plant in India with Maruti. This initiative took by Ex Prime Minister Rajiv Gandhi to look for future growth prospectus. The next change is big change in the history of polices which was delicensing in 1991 from strong license raj. This new experience is beneficial for producer, retailer and consumer. Because automobile industry is free from any kind of license and relaxed from heavy import and export duties. Last big change is automobile sector is allowed 100% foreign direct investment in India by any foreign player to setup his manufacturing plant. Affect of this change is seen clearly because it leads to enter of new 17 players in industry. Different type of automobile products now available in market and consumer start enjoying the products. After the lifting of licensing in 1993, 17 new ventures have come up of which 16 are for manufacture of cars. This industry currently accounts for nearly 4% of the GNP and 17% 0f the indirect tax revenue. The automobile industry have strong multiplier effect and capable of being driver of economic growth. Auto industry has new and vast market to play in the Indian economy. Consumer in India was excited to purchase new products. They are bored to see only ambassador, fiat padmini and Maruti 800 on road. Automobile industry does not provide only new products but vast provider of employment, high income level to employees, taxes and several duties to Indian government. They also made the big impact on financial condition of government. They launch the Indian market and players on international platform. It plays vital role in countries rapid economic growth and industrial development. The automobile sector solves several problems which should be solved by government like employment, development in every region and optimal use of resources available. Current standing of Indias automobile production is around 2% of total global production of Automobiles. This happened due to continuous change in automobile policies at regular interval. These regular changes in policies change the outlook of Indian economy in front of foreign investors. After

china, India is considered to be 2nd best investment centre in Asia. India is favourite investment centre due to many factors like easy available resources, special plans provided by government, cheap manpower and cost of resources. A journey started after 1991 reform an automobile sector is just a multiplier, a driver of employment, new source of technology and investment. Now Indian markets have presence of almost every big automobile manufacture and many more companies heading towards India because of market potential and consumers purchasing power. Government and policy makers are planning to extend the automobile industry to increase the exports and imports. A proposal of AMP (automotive mission) 2016 came in existence to increase the benefits to manufacturers, employees and consumers. This plan include a several job opportunities, technology up gradation, subsidies to manufactures and increase exports to make strong presence at international automobile market. Even experiencing high growth in automobile industry the situation is unsolved. The journey of automobile sector is come to end or its just started.

Current Status of Indian Automotive Industry

Automobile Industry includes commercial vehicles, Mutli-utility vehicles, Passenger cars, two/three wheelers, tractors and auto components. Production of these entire stated automobile was done on guidelines issued by Ministry of heavy industry. India now has large number of manufacturers setup in India with their established subsidiary company for Raw Material, etc. there are 15 manufacturers of passenger car and multi-utility vehicle, 9 manufacturers of commercial vehicles, 14 manufacturers of two and three vehicles and 10 manufacturers of tractors. The Indian automobile sector sustained at cumulative average of 22% in between the 1992 to 1997. After deregulation investment in automobile sector is Rs. 59,500 crores. They provide direct employment to 4, 50,000 employees and 1, 00, 00,000 indirectly. Currently India ranked 2 nd in production of 2 wheelers and 5th in commercial vehicles. Due to recession in last 3 years the industry faced a slowdown but able to maintained a positive growth rate. The component industry was faced least effect due to its exports capacity and able to maintained approximately 12% growth rate. The road traffic now needs attention to work on due to increasing traffic on roads. India is 2nd largest populated country with 3.3 million kilometre network to ride. But now management needs to be considered as major problem.

2. ROLE OF GOVERNMENT As above mentioned prior to 1991 India was not a favourite investment destination of foreign player. The policies were so tight and regulated that no foreign player thinks to set his plant in India because they cannot see any chance of return and opportunities. But due to continuous changes in polices in 1991 and 2002. The country was able to gain attention of all foreign investors throughout the world. Now India is favourite destination of foreign investment in Asia. The main responsibility of government is to secure this position and continue with growth level. India has to look for future projects to make his presence in international market at high level production and exporter. To gain this goal government have to look for effective technology and efficient workers because these factors are wheels of automobile sectors. Government has to look for time to time change in policies as per the need of industry. The import duty and export charges should be deal accordingly because presence of many foreign players makes it more important. The political conditions should be balanced to run smooth industry programs. Otherwise government never look on issues prevailing in market and needs to be fulfilling in the industry. Government will create a conductive eco-system to support world class innovation in all segments of the automobile industry. The government will also support and open the centres for research and development in the field of automobile industry. These centres will be funded and supported by government to search the resources available and innovative technology can be used in manufacturing plants and offices. Government also promote the eco friendly vehicle to be innovate and used in the country to save the environment. So government should take care of all future prospectuses to control. Now, Government is coming with AMP 2016 to double its production of automobile industry. Government have to search for new alternative resources for new players coming in the Indian market.

3. Review of literature
According to Mr. Mahipal Ranawat and Rajnish Tiwari, paper presented on Influence of Government Policies on Industrial Development: A Case of Indias Automobile Industry at Hamburg University of Technology, Germany. They review condition of automobile industry from 1974 to 2006. Mainly they focused on the role played by Indian government for growth of automobile sector by introducing various policies. To support his argument various sub topic chooses by them like impressive growth in domestic sector, increase in export trends of Indian automotive industry, foreign direct investment flows to India, growth drives of Indian Automobile market, inspiration to launch small budget car: Tata Nano , factors affecting Indias competitive position and mainly policy framed by experts to boost the automobile sector. They divide the analysis of policies issued in four different phases to classify them separately. In first phase 1947-1965 and second phase 1966-1979 policies issued by government was only related and concerned towards the protection of domestic players interest. They never concerned to expand the market due to much other senior priority like poverty and education. In third phase 19801991 the first important step took to look the industry from western angle. Relaxation was allowed in a case of technology up gradation from any other countries. In same duration two more steps were taken like promotion of exports and acceptance of broad banding policy for automotive segment. This modernisation of policies will promote the exports of country. It helps to double the production from 1561 million in 1980-81 to 3041 million in 1884-85. The technology up gradation helps to set new technology base. New vehicle will introduced with better fuel efficient engines and more features were given in automobiles. The broad banding policies were helped to increase the competition. The fact supporting was telco and other companies expand their engines capacity from 100 cc to 150cc. The effect of 1991 delicensing scene clearly with high growth in automobile sector and Indian moved up in ranking of production of passenger and commercial vehicles. This also lead to entre of new foreign players like Mercedes, General Motors, Hyundai and many more due to allowed 51% foreign direct investment in automobile industry. In 2002, with effect of change in policy like 100% foreign direct investment allowed in automobile sector. It helps to increase the internalisation and FDI flows to India. The FDI flows at CAGR of 77% from 2004-05 to 2007-08. Further government start working on Research and Development centre. They ordered many companies to start special department in their administration for R&D. With the effect of this guideline, Maruti and Suzuki announced the R&D department to work on future projects and possible resources to achieve it. According to them, policy reform helps for economic growth and more opportunities. They believed these steps take automobile industry to new heights. They said in his paper domestic survived till now due to strong policies issued in favour on them during the regulatory and license raj. Tata Motors and

Bajaj Auto survived till now due to strong regulatory policies with capturing the strong position in the market. In last, Indias market is great producer of small cars. So position should be secured and increase the role in small car industry. Now the domestic sales of small cars are strong. It is one of the major factors to increase the confidence of foreign players to increase the production in India. Government just have to strong auto policy and take initiatives to hold the position. All the points supported by them are correct and effective as per shown facts and figures in paper presented. But I am not fully satisfied with them. I like to review all the points with update facts and figures and try to draw the conclusion with comparison of any other nation auto policy. This helps showing clear picture of growth of production and exports of any particular company with effect of 1991 reforms.

Need for Effective Automobile Policy Automobile policy was established to gain desired goals to maximise the growth of industry. The Automobile Policy should be more regulative because now role of government is only upto to extent of policy making only. Still now polices able to attract many foreign companies in India. But policies should be more investor friendly and helpful for foreign companies to setup their manufacturing plant in India. All the problems of investors should be addressed properly and proper connection with WTO should be maintained to update with norms set by them for global trade. Presently companies from all over the world are here and resources are used extensively. The situation in India is conduces contention over the competition. Automobile industry is going under the structural transformation. Now industry distributes itself in Tier 1, Tier 2 and Tier 3. Many MNCs convert themselves into Tier 1. Tier 1 producer are purchaser of auto components from tier 2 and tier 3 suppliers. Many foreign companies also fall into tier 2 and tier 3. So polices should be planned by keeping the entire tiers on one table. Indian automobile have the potential to became powerful at international level but for that industry needs to grow with pace of world automobile industry. For that certain efforts are required to sustain at every point and need of industry required for production. There are certain challenges like low scale, inadequate R&D, technology support, lower productivity, limited resources for international marketing and establishment of an efficient supply chains. To meet with all these challenges the auto policies were framed.

4. Auto policy review (1980 2010)

Automobile industry working on guidelines issued in auto policy issued specially to control working of industry. The automobile industry is gone under many phases and faces many policies changes. During 1947-79 the industry is going under the highly regulated phase. In this phase industry is captured and ruled by few domestic players like HML and PAL. Entry of foreign is highly restricted in this phase. Next phase start from 1966-79, this phases also regulated under high restriction and license rag. The conditions are same as earlier phase. Next phase start from 1980-91, in this phase some modernisation of automobile industry is done by introducing relaxation is technology transfer and allowed for foreign collaboration. Exports figures get double and also lead to increase in competition. Last phase is 1991 onwards, this phase change whole scenario of industry. This phase gets the advantages of delicensing and allowed 51% FDI in any automobile industry. Many changes and benefits announces later in this phase also like 100% FDI allowed in any industry. In this paper, I took the partial regulated phase (19801991) and liberalisation phase (1991 onwards). I. Partial regulated phase (1980-91):-This phase was typical deal with modernisation policy for automobile industry and promotion of export steps. 1. Modernisation Policy In the early 80s when modernisation policy is needed then government took the right step and launch the modernization program for automobile industry. This step took mainly for launching fuel efficient engines and increased competition in automobile sector. This Policy cover the other areas like allowed import of technology and machinery, relaxation in new entries and foreign equity collaboration. These policies were introduced due to Japanese demand of new market and government observed right time to launch new guidelines. Several new joint ventures came into existence like Maruti and Suzuki, etc for technology transfer and equity collaboration. Many other domestic players also tried to merge with foreign player to enjoy technology advantages to serve the big players going to set up in market and consumers too. All this had a positive impact on industry and economy growth. As industry advantages several numbers of models start launching in market. This foreign collaboration came with extreme highly developed technology and elite quality products. Through these collaboration new idea of reducing the body weight of vehicles were introduced and use of fibres and plastic were taken into care while manufacturing the products. Japanese manufacturers bring the world class facilities to Indian market. Many suppliers of foreign manufacturer shift themselves to Indian market to serve their regular customer. This brings many ideas of business to Indian market. The hotspots of Japanese manufacturer are Gurgaon (Haryana) and Pithampur (Madhya Pradesh). The main changes scene in passenger cars because they only concentrated in passenger cars

due to unexplored area and break of monopoly created by HML and PAL. Japanese manufacturer capture around 60% of market in few year only. The negative effect of this policy was breakdown of monopoly created by HML and PAL and ignorance of other vehicle production.

2. Promotion of Exports
Automobile industry is the new and net user of foreign exchange. They need to have more foreign exchange to have more trade easily. Otherwise the payment of imports gets costly and revenue of products sales is low. Automobile industry was going through the unstable demand production ratio. Firms trying to make their production maximum but domestic demand remain low in consideration to production. So government came up with the idea to promote the exports of production to match the balance of payment and balance of trade. The entire firms get negative influence if government not came with ideas of promotion of exports to fully utilisation of installed capacity of production. The problem of overproduction is seen in the market, so government open gates of exports to send production cross the borders. This ideas consist the simple procedures to export the products, firms has license to exports the 100% of their production and special plans for existing units to expand themselves for purpose of exports. These initiatives encourage the manufacturer to increase their production and earn maximum foreign exchange for future payments. The initiative taken in modernisation program also influence domestic manufacturer and foreign players to exports the goods as per new standards and better quality. To promote exports technical up gradation is needed to match up with foreign consumers desire. For technical collaboration with first collaboration done between LVECO and Ashok Leyland to maximum the numbers of automobile exported to Mexico. Many Japanese manufacturers like Maruti Suzuki start exporting their 800cc passenger cars to European market. European market is one of huge producer and user of passenger cars. Due to less domestic demand firms have full chance to maximise their exports by increasing their production. Previous to this initiative, India is new importer of products and technology but after this Indian firm able to mark their spot at international level in terms of exports. The figures of exports get double from 1591 million in 1984-85 to 3054 million in 1988-89. Indias standing on exports at global level was around 0.1% but at least firms get a new ways to look for profits and motivation to achieve their maximum production level compared to installed capacity. The decision to promote the exports emerges as important decision taken to boost the automobile industry.

3. Broad Banding Policy This policy was introduced in 1985 to support the efforts and plans started in previous policies. The main attention was provided to maximum utilisation of installed capacity and expansion of

firms and market to achieve high growth rate in automobile sector. Many initiatives were taken to achieve coordination between the low cost production of vehicles and demand stimulation. Under this program, government allow license to firms to produce any kind of products instead of giving license for any particular product. This step free manufacturer to think out of box and produced what required in the market without any government intervention. Through this firm able to utilise the maximum installed capacity for production and exports also improved due to low intervention and easy procedure as stated in previous policy. This policy did not have large number of effect in industry but able to maximise benefits for some particular firm. Telco and Lohia machines benefitted mostly with effect they able to increase their engines capacity from 100cc to 150cc. The effects of this and previous policies would be seen clearly in late 1980s. In late 80s automobile industry start seeing effect when many orders for export and domestic demand increases. To deal with important issues like saving on import of oil, growing demand in vehicles and high growth rate of automobile industry. Government decide to upgrade the technology and increase competition in market to match the above mentioned issues. Many other important policies made during this phase. Many sort of relaxation provided to foreign players to collaborate with domestic player and existing foreign collaboration. In everybody mind one question is continuously prevailing like why government condition so easy to setup plant and manufacturing units by foreign players? The answer to this is scene when government start producing vehicles for middle class section of population. Middle class section hold big portion of population in total population. The increased level of income and status of living increase the demand for passenger vehicles. The continuous increase in prices of oil and other goods related to automobile industry. This create a situation of worry between manufacturers related to purchasing power of public but no slowdown is scene in demand of vehicles after any other changes in prices. The policies issued for automobile sector in 1980s have one more important aspect to look and consider. The only contraction was that only one entry of foreign player allowed in high growth car segment in comparison to low cost vehicles four entries was allowed from foreign countries. II. Liberalisation phase (1991 onwards): In this phase new phase of automobile sector was taken into the picture. During early 1990s, Indian economy facing debt crisis due to which government unable to pay loan and instalments

to various agencies and nations. The Finance Minister came up with the idea of delicensing or ends of license raj. In this phase many important steps were taken and policies reframed from time to time.
1. Liberalisation policy (1991 onwards): This phase considered to be most important in the history of automobile industry. The important polices were declared in this phase regarding the delicensing of automobile industry. It means 51% foreign direct investment was allowed in the sector via automatic route. No more licenses required to enter in the automobile industry to foreign players specially. Many relaxation were also provided like reduction in import duty which is main problem for any foreign to setup in Indian market. Now they can easily transfer their technology to India. The impacts to this policy in scene in mid 90s like many foreign players start entering into Indian market. The policies lead to many structural changes in automobile industry. They forced to restructure the market composition and increase the competition in the market in terms of prices and quality of products. Monopoly conditions prevailed in the market before these policy changes. The entire firms changes behaviour towards products and technology acquisition. Now they need to change themselves towards performance oriented goals. Firms were allowed to restructure themselves according to their needs and installed capacity. Main motives of every firm is maximum utilisation of resources available in the market and capture market composition as per their ability and products quality. Many joint ventures were took place in this phase. Around 16 new manufacturing units came into existence to serve the nation with keeping their business interest. Big and small company came together into market like Mercesedes, general motors, ford and Hyundai etc. In early stage of reforms many firms production were low as per their capability due to sudden change in number of suppliers and limited number of demand in the market. The automobile industry suffered from many problems in starting like installed capacity is above actual production and sales-capacity ratio. These problems start affecting the calibre of firms and de-motivate them towards Indian market. The condition start improving near 1998 with initiative took by government and consumers believe start in favour of foreign players. To solve the problems relaxation is given on imports of capital goods and technology transfer. Relaxation was also given in terms of procedures and tariff duties included in export and imports of vehicles and raw materials. As compared to 1980s modernisation policy technology transfer in this phase is better and effective in terms of production. In 1980s phased manufacturing programme is introduced. In this firms were obliged to maintain in own foreign exchange neutrality and use foreign currency in terms of trade without information to government. But now 51% foreign direct investment is allowed in automobile sector without any intervention by government. Firms can use their foreign currency reserves as per their ability to pay. In previous policy foreign players were not allowed to import their CSD/SKD Kits but in 1997 government announced the signing of MoU with foreign player to

import their SKD/CSD kits. Foreign direct investment helped manufacturers to identify the cheap resources available in the market or helped to explore the unidentified resources. The 1991 deregulation phase deal mainly with following points: 1. Raised technology standards 2. World class designs 3. Increased exports performance 4. Quality offered to Indian consumers

In this phase government also get benefitted while receiving so much of tax and duties received in favour of free economy. Government also overcome from problem of debt crisis and became much dependent in this industry regarding the overall development of region also. Like Gurgaon (Haryana) and Aurangabad (Maharashtra).

2. Auto policy 2002 The policies issued in 2002 were completely concentrated on making a India automobile global and competitive in nature. It was also raising the contribution towards economy directly and indirectly. Directly it provides higher tax revenue to the government and indirectly it provides higher foreign reserves. This policy came with idea of 100% foreign direct investment into economy and automobile industry. This policy planned from foreign investor point of view. In this policy no complexity was present of procedures and rules. Foreign investor can directly invest in automobile sector via any automatic route. The impact of 100% FDI in automobile sector was clearly scene in growth of industry during 2004-05 and 2007-08. After 2002 many foreign manufacturer of high class passenger cars was start taking India market seriously. Previously foreign investor can invest upto 51% but now this figure extended to 100%. So big manufacturers can built cars according to their quality standards and better technology. BMW and Volkswagen establish themselves in the industry after the 2002 and start delivering products according to their potential and standards. High rate of competition from global market in automobile sector lead to shortage of resources at some point of time. Government decided to look for more growth drivers of automobile sector. They take initiatives and set many Research and development centre to observe more resources available in the economy. Suzuki and Hyundai are 1st manufacturer who announced the R&D centre to open in India. These policies also beneficial for increasing export-output ratio (the ratio of total vehicles output related to export of vehicles) and increasing total imports to sales ratio (ratio related to import of vehicles in India and sales of import vehicles). These increasing ratios try to mark a

special place in international market and import capability of economy. The role played in this phase by government was related to encourage firms for better performance and fully utilise their installed capacity. After liberalisation took place the role of government get lesser on regulation and control over industry. The higher competition prevails in the industry but its not sudden. Proper facilities and time were given each and every firm to adjust themselves in the industry. Again this policy concentrated on more R&D initiatives to look for alternative resources to carry out the momentum of growth in economy. Industry have eye on small car production sector. Now India is one of the largest producers of small car segment. So economy should not leave this position and continue with growth prospectus. Small car segment has international competition but if company settled in India take care of situation. No worry should be there and India can be face of small car production. As per increasing competition, imports, exports and domestic demand industry should look for basic and improved standards of vehicles manufactured. Special attention was given to adopting higher environmental friendly technology and safety standards to secure the consumers or owner of vehicle. Government setup the bureau of Indian standards to look for safety features and others needed action.

5. Parameters to Check the Impact of Auto Policy The Automobile Industry observed the real growth after liberalisation. Here the automobile industry supported the effect of policies changes. The sharp increasing in exports and imports were seen due to low import duty. The other figures also show the real impact of liberalisation 1991. There are some parameters which support the whole issues we discussed above which are following. Before showing figures lets see the standing of each segment in the market. Two wheelers segment: Two wheelers is the main and most common way of travelling in India. This sector consist motorcycle, scooters, mopeds and gear less scooters. In terms of volume of production two wheelers is the largest producer of automobiles in India. The two wheelers market consist motorcycle of engines capacity 100cc, 150 and till 500cc. Market did not have any share in production of superbikes. Superbikes did not have production in India because demand is not there. Example, BMW introduced his superbikes in 1990s but totally failed in market. As if today condition are changing and many superbike producer like Harley division setting up their plant in Bawal (Haryana). Now, the main problem is maintained roads to drive such type of vehicle and safety issues should be taken care off. This segment has promising growth from last decades and expected to continue further. Two wheelers market grows at CAGR of 11% from last decades and expected to grow as increase in population. In India, most of population lives in rural and semi urban areas where people preferred to travel through cycle or public transport. But increase in income level of population leads to switching on motorcycles. The factors effects this sector is rapid urbanisation in rural areas, easier finance schemes available for purchasing of automobiles and introduction of different model with different configuration. India have worlds largest manufacturer of motorcycle, Hero Honda. Here market for motorcycles in different from developed country markets.

Light commercial vehicle These are different from heavy commercial vehicles. In India, market for LCV is growing due to more rural and semi urban condition in country. These are mainly used for the transportation in rural areas due to bad and narrow roads. These are small in size so easily travelled to inner parts of India. For example, Tata Ace is a big hit product launched by Tata motors in rural areas.

The small size and capability to transfer heavy products from one place to another place makes it favourite product among rural India. Medium and Heavy Commercial Vehicles This segment should be consisting of rigid trucks, tractor trailers, semi- trailers, bulkier and tipper. This segment vehicle available in the range from 2 to 12 axle and mostly run on the diesel fuel. This segment is mainly dominant by Tata Motors, Ashok Leyland and Eicher Motors. The main manufactures of buses are Ashok Leyland and Tata Motors. Government strongly announced the use of CNG (compressed natural gas) in buses. In capital of India, it is mandatory to use CNG in public and private buses. These all are done due to environmental problem and availability of alternative fuels. Tempo also included in this segment. There sizes are smaller to regular trucks. Mainly travelled to rural area where big trucks cannot reach

1. Installed Capacity The installed capacity shows the capacity of automobile industry to serve the nations. This help to check the strength and capacity for export purpose of automobile industry. This capacity is not decided by government in current phase. Previously special license was proposed to increase or decrease the production capability.

Source: SIAM

Above picture shows the figures of two different years. Here we can see the increase installed capacity from year to next year. Two and three wheelers have much strong installed capacity due to concentration on middle class section. Even every household prefers to have 1 two wheelers in house to support the travel local areas. The four wheelers section increases according to demand and need of country. The installed capacity was increases due to increase the exports by two wheelers companies like Hero Honda, Bajaj and TVS. The engines installed capacity was increases but not much. The foreign companies still prefers engines from their respective supplier from the respective companies. This could be done to match up their quality product and standards of products they preferred to launch in the Indian market.

2. Increase in production of Automobile Production The automobile industry in India before liberalisation produces vehicles to satisfy domestic need only. But when foreign investors enter into market and many foreign manufacturers setup their plant in India. The production capacity of automobile sector increase and industry has surplus goods. The automobile industry is fit enough to start exporting the surplus goods to other market. The growth in automobile industry is due to growth in all segments of industry. Every segment production increased but most notable growth is seen in passenger car and commercial vehicle. The 2 wheelers production increases beyond any other segment. During last few years certain macroeconomic conditions were helped Automobile Industry to grow further. The government of India took several policies to boost the industry. It included easier financing facility available for producer to expand its size and increase in real income of consumer by which their purchasing power regarding products is increased. The demand in commercial vehicle increases with development of manufacturing sectors. Its growth force government for improvement in infrastructure, more safety guards and maintained roads.

Below chart is showing the Increase in Production of Passenger Cars

2,500,000

2,000,000 1,926,484

1,521,813 1,500,000 1,322,728

1,516,967

1,112,542 1,027,858 1,000,000 843,235 608,851 574,369 517,907 500,000 348,146 407,539 401,002 390,355 564,052

264,468

1994-95 1995-96 1996-97 1997-98 1988-99 99-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: ACMA

Above chart is showing the picture of increase in production of passenger cars. There is low production in starting year of liberalisation 1994-95 because reforms is just took place and it take time to strong the momentum of production capacity. Then slowly production is taking rise due to many joint ventures and entry of 16 independent foreign players. The companies like Hyundai and General Motors entre into the market. After 2002, Government announced the 100% FDI in automobile many foreign players head towards Indian market and setup their manufacturing units. The government announced the many incentives to invest in Indian market. Foreign players have believed in Indian market due to unexplored resources of production and strong purchasing power of population.

Below chart shows the increase production of Mutli-utility vehicles

300,000 272,848 250,000 222,495 219,498 196,371 200,000 182,018 246,038

150,000 134,594 134,613 113,440 100,000 67,643 50,000 49,675 124,310 125,938

146,325

114,479 105,667

1994-95 1995-96 1996-97 1997-98 1988-99 99-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: ACMA

Above chart showing increase in production of MUV due to effect of liberalisation polices. The production of MUV is not that much low prior to liberalisation. Ashok Leyland and Tata Motors is big producer of MUV in 1980s. So liberalisation policy is not beneficial for them but its beneficial for economy prospectus. This sort of vehicles mostly used in transportation purposes. This helps to maintain the healthy administration working throughout the country.

Below chart showing increase in production of LCV ( low commercial vehicle)

350,000

316,437 300,000

254,049 250,000 225,724 224,587

200,000 171,781

150,000

129,417 108,917

138,896

100,000 92,805

85,069 65,069 55,371 61,213 63,869 65,756

83,195

50,000

1994-95

1995-96

1996-97

1997-98

1988-99

99-2000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Source: ACMA Above chart showing the trends in production of LCV due to special attention was paid to this sector during the liberalisation and in 2002. From 1994-95 to 2001-02 this segment does not observe any special turn due to entry of only big players. In 2002 government announced 100% FDI. It helps this segment to see uptrend in production by entry of foreign players who are concentrated on low commercial vehicle.

Trends in production of 2 wheelers

9,000,000 8,444,852 8,000,000 7,112,281 6,503,532 7,000,000 6,201,214 6,000,000 5,193,894 5,000,000 4,355,168 3,876,175 6,798,118

4,000,000

2,906,323 3,000,000 2,183,430 2,000,000 988,709 1,794,093 1,387,276 1,125,958 1,000,000 809,097 647,521 1994-95 1995-96 1996-97 1997-98 1988-99 99-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: ACMA Above chart shows the continuous growth in production of 2 wheelers till 2006-07. In 2007-08 the downturn is faced due to overall recession in the world. This sector production is maximised because production of this sector is used in purpose of exports. The Bajaj Auto, Hero Honda and TVS are main producer in India.

Production trend in case of Mopeds

800,000 724,510 694,974 700,000 623,114 600,000 571,070 668,666 667,242 671,699

500,000

516,936 427,498 430,827 436,219 379,574 351,612 332,294 348,437 379,987

400,000

300,000

200,000

100,000

1994-95 1995-96 1996-97 1997-98 1988-99 99-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: ACMA Above graph shows clear picture of decreasing production trend in mopeds. The uses of mopeds were high in previous decade but in this decade no one use to travel through mopeds. Due to growth in motor-cycles production with providing extensively feature. Market of mopeds was getting lower day by day. There are very few producers of mopeds in the market like Hero, etc.

Trends in production of buses and trucks

350,000

300,000

294,957 294,258

250,000 219,297 214,807 200,000

250,171

192,283 166,123 152,185 150,000 129,731 114,068 95,895 100,000 101,994 80,452 88,185 96,752 120,502

50,000

1994-95 1995-96 1996-97 1997-98 1988-99 99-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: ACMA Above charts shows many up and downs in production of buses and trucks. It reaches maximum upto its calibre in 2006-08. But recession made downturn in production trends. The imports of buses and truck which are fully powered and have capacity to load more weight are start came in use. Then domestic user thinks of technology transfer or up gradation. It helps to boost the market of local products again.

Export position of Indian Automobile Industry

Automobile industry of India registers a growth in term of export. After liberalisation to solve the problem of over production economy decided to export the vehicle. Now Indian automobile is known for one of vast exporter of automobiles. Manufacturer settled in India supplied vehicle to other countries but also provide auto component to same nations. The key partners of India for export are Netherland, Middle East, North America, South Asian Neighbours and European Union. The low cost resources and quality products are main tool of India. Because of which India came into the eye of every manufacturer to set his base in India. The other supporting factors of increasing exports is regulated and protected policies and bilateral and multilateral trade agreement signed between two or more nations to carry on trade on some special conditions. Nowadays the automobile products made in India are acceptable at every piece of globe due to world class design and quality products. Indian Auto Component industry made their global image due to cost effective resources and quality conscious products exported. The industry experts believed that export of India crossed the figures of USD 25 million by 2015. Automobile Export Trends Category 200506 175,572 2007-08 2008-09 2009-10

2003-04

2004-05

2006-07

Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers

129,291

166,402

198,452

218,401

335,729

446,146

17,432

29,940

40,600

49,537

58,994

42,625

45,007

68,144

66,795

76,881

143,896

141,225

148,066

173,282

265,052

366,407 629,544

513,169 806,222

619,644

819,713

1,004,174 1,140,184

Grand Total 479,919 Source: ACMA

1,011,529 1,238,333 1,530,594 1,804,619

As seen in table Indian automobile have low level of export till 2002. In 2002, declaration of 100% FDI in automobile sector from foreign investor changes the export capacity of economy.

Even in 2008 recession it does not get much affected and carry on positive growth. In 2010 it reported highest exporting figures in entire journey of automobile sector till date. Domestic Sales Trends: Automobile industry of India provides vast choice of list to consumers for purchasing purpose. In todays time automobile companies in India produces almost every type of automobile and can sale any amount of automobile in market without any permission. Indian automobile industry provides strong base to global automobile industry for future growth. In Indian economy demand for passenger car and commercial cars is rapidly increasing. The demand for two wheelers vehicle is left behind in term of passenger cars and commercial cars. Now, export can be done at any amount but if we took case for imports of automobiles. The import duty is reduced now and many relaxations were also given. Any foreign player can import complete built unit (cbu) to set his plant in India. If any kind of threat his found and excess of competition is found in economy. Policies were still strong to stop any import. Automobile Domestic Sales Trends Category Passenger Vehicles Commercia l Vehicles Three Wheelers Two Wheelers Grand Total 2003-04 902,096 2004-05 1,061,57 2 318,430 2005-06 1,143,07 6 351,041 2006-07 1,379,979 2007-08 1,549,88 2 490,494 2008-09 1,552,70 3 384,194 2009-10 1,949,776

260,114

467,765

531,395

284,078 5,364,24 9 6,810,53 7

307,862 6,209,76 5 7,897,62 9

359,920 7,052,39 1 8,906,42 8

403,910

364,781 7,249,27 8 9,654,43 5

349,727 7,437,61 9 9,724,24 3

440,368

7,872,334 10,123,98 8

9,371,231 12,292,77 0

Source: ACMA As above after liberalisation many consumer took the loan and purchase the automobiles for their respective uses. In India main target is middle class so all the policies was settled according to their convenience. In 2008 due to recession and low lending from banks domestic sales goes down. But after the economy recovery the domestic sales get recovered and figures

again start increases the effect of fast recovery is shown in 2009-10. Country registers highest sales in domestic markets. The domestic market shows increasing trends as stated above. The 2 wheelers vehicle always gain a maximum share of domestic sales. Due to heavy demand and heavy supply system follows in 2 wheelers vehicles market. The next maximum sales done in passenger car segment and commercial vehicles followed them. The 3 wheelers vehicles have lowest sales in Indian market in comparison to other vehicles. Segment Wise Market Share in 2009-10 Two wheelers Passenger cars Commercial vehicles 3 wheelers Source: SIMA 76.23% 15.86% 4.32% 3.58%

Due to lack of availability of data of previous years to compare the increase or decrease in market shares of each segment. The comparison could not be possible but as observation from above charts. The 2 wheelers market always had a maximum share of market and passenger cars are 2nd favourite of consumers in India. The continuous growth in automobile industry lead

to increase in market shares of each segment. Even while exporting our automobile products to other nation 2 wheelers and passenger car are precious to importers.

5. China Auto policy China is one of the leading producer and manufacturer of automobile products. They regulated their market mainly in 2000 onwards. Whereby, Indian regulated market in 1990s. But the growth rate and development in both countries are different to each other. The development of the automotive industry in China has clearly been shaped by the circumstances of Chinas wider political economy. To understand its growth, it is important to understand its evolution in the wider context of Chinas industrialisation which, unsurprisingly, has been centrally driven and shaped under very distinct industrial policies, which we will review in this section. In this section, the history of the automotive industry is considered in terms of four key phases of development: the central control and planning era of 1949-1979; the proliferation phase (1979-1994), the phase of concentration (1994-2004) and current phase till 2010. For reviewing the policy, I choose to take time period from 1980 to 2010.The time duration covering the two phases mainly proliferation and concentration phases.

Proliferation phase (1978-94)

China began to open up to the rest of the world, and as it did so the focus moved from political to economic issues. Developing Productive Power rather than Class Struggle became the predominant concern. Most crucially, at this point the transition from a planned economy to the market economy began. Provincial and municipal governments and ministries now had more autonomy to make decisions without the fear of being accused of going down the capitalist road. Many chose the auto industry as a means of developing their regions or departments, and the automotive industry entered what might be termed a proliferation stage. This proliferation occurred along two dimensions: an increase in the volume of output, and an increase in the range of products. These are done to make market more productive for domestic supply. During the central planning stage, volumes and variety were centrally planned, rather than controlled by the market. Most vehicles were trucks and the production of passenger cars was very limited. Saloons were only available for senior officials and there were strict regulations concerning which officials could use which vehicles. With a relaxation of planning, there were many more customers and the market for saloons and other vehicles increased greatly. For example, there were no taxis at all during the central planning period, so as restrictions were relaxed, saloons and mini vans were produced to supply the taxi market. Existing facilities offered neither the quality nor the diversity of products to satisfy this growing market. The FAW and Dongfeng, controlled directly by the central government, possessed scale advantages, but lacked flexibility. Many small automotive factories began to develop under the direction of both Provincial and Municipal governments. Some machinery factories under the control of the Ministries of the Weapons Industry and the Aviation Industry also began production of vehicles such as light trucks, mini vans and large passenger cars. The number of automobile factories increased from 55 in 1979, to 114 in 1985.

The Concentration Phase (1994-2004)

The Chinese market for automobiles was, and continues to be, protected by high tariffs a situation that was only eased very recently by Chinas accession to the World Trade Organisation (WTO). An overview of the tariffs, pre- and post-WTO accession in 2002. A legacy of central planning was that the government decided the price of automobiles; this absence of a market mechanism to mediate between demand and supply enabled small-scale auto factories to survive. However, these small-scale, scattered, manufacturing operations spread capital and other resources thinly, thereby hindering the development of large-scale automobile plants capable of competing with foreign automakers. Although the ministries and local governments have considerable autonomy, the central government continues to be influential with local governments, and by the 1990s two powerful forces were at work. On one hand, the pressure of the rapidly developing market and the growing presence of foreign companies put pressure on China to develop several large-scale, competitive automobile plants. After China started negotiations to join the WTO, there was only a limited period of tariff protection before Chinese enterprises were to be exposed to foreign competitors. On the other hand, local governments were supporting the development of local manufacturers to boost the industrialisation in their respective region, which lead to a range of smaller vehicle manufacturers owned by municipal governments, such a Nanjing Automotive for example. Nanjing was originally a small-scale truck manufacturer, yet under distinct pressure from the provincial government entered car production and later became Fiats joint venture partner in China. In 1994, the national economy, and the automotive industry was been chosen as one of these pillar industries. The reasons for this choice are not difficult to see - an automobile is composed of more than 10,000 parts and components; the automotive industry is related to many other industries such as metallurgy, petroleum, chemistry, coal, light industry, electronics, and textiles, and it was reasoned that development of an automotive industry would encourage Chinese enterprises in many sectors to specialize and better co-ordinate their effort. ( H o l w i e g ,
2005)

These conditions were the background for the Chinese government to formulate its Automobile industry policy. This was submitted by the State Planning Commission, the State Economy, the Trade Commission and the Ministry of Machinery Industry in February 1994, was approved by the State Council in March that year, and published in July 1994. The Policy had four key objectives: (1) To establish large-scale groups of saloon and light truck producers (2) To improve component industry (3) To create automotive product development capabilities; and

(4) To encourage individual car ownership. The policy addressed the four objectives listed above, and also issues such as local content requirements, pollution and environmental considerations, conditions for the approval of foreign investment and so on. The policy contained an aggressive schedule for the development of the Chinese automotive industry, as outlined, and was further amended only in 2004.
Tariffs, Pre- and Post-WTO Membership ( GAO 2002)

Before entry into WTO

After entry in WTO

Tariffs

200% in 1980s

25% by 2006

80-100% in 1990s

Import quotas

30,000 vehicles a year allowed from foreign carmakers

Quota increased by 20% a year, phased out by 2006

Local content requirements

40% in first year of production, increasing to 60% and 80% in Second and third years, respectively

No local content ratio requirement

Auto financing for Chinese domestic costumers

Foreign, nonblank financial institutions prohibited from Providing financing

Foreign, nonblank financing permitted in selected cities prior to Gradual national rollout

Foreign participation in sales and distribution __________________________ Source: (Holwieg, 2005) __________________________

Will by 2006 be allowed to own vehicle wholesale, retail organizations, integrated sales Organisation

Stages of the 1994 Automotive Industry Policy

Stage Description 1994 - 1996 Foundation Stage: Approved projects of light weight vehicles and saloons to commence production; the development of the components industry; vehicles to have a local content of 60-80%. 1997 - 2000 Attacking Difficulties Stage: The target output for 2000 was 2.7 million vehicles, of 1.35 million Were to comprise saloons. The intention was for there to be two or three large- scale automobile groups and six or seven backbone automobile enterprises. Basic R&D capabilities were to be established.

2000 - 2010

Rapidly Developing Stage: The target output for 2010 was 6.0 million per year, of which 4.0 million were to be saloons. The industry was to be self sufficient for product development and competitive by international standards.

Source: ( H o l w i e g ,

2005)

-------------------------------------------------------------------------------------------------------------------------Above description, helps to understand the thinking of Chinese government planners. In First stage, they set the foundation of automobile sector policy so strong no one faces any problem regarding the component and production facility. Till 2000, Chinese start thinking for need of research and development program to set up. Intention was getting 2-3 large scale automobiles and 6-7 backbone automobile to support the industry. Till 2010, the industry wants to get self sufficient in production of any auto component field by international standards.

Auto policy 2010

China's automobile industry released a much-anticipated new policy with rules expected to slow investment and consolidates the auto industry. The policy also encourages car buying through new traffic laws enacted by local governments. The Policy-Maker, the National Development and Reform Commission, claims this policy will help create a healthier auto industry and cites seven distince differences from the 1994 policy, including abolishing market-share requirements for local vehicles, which stated that by 2010 half of all new cars must be built in China. The policy also favoured large manufacturers over China's aging producers. Companies in other industries will not be allowed to buy failing manufacturers a will need to invest at least 2 billion Yuan ($241 million) accordingly to the new policy. 6 - ( " T h e C h i n e s e g o v e r n m e n t , ) The policy harms importers by closing a tax loophole. Previously, foreign companies imported cars in bulk and stored them in a holding area only paying taxes as the cars were sold. Now taxes must be paid as they are imported. Chinese investors must now also own 51% of any joint venture and that a Chinese company must be the largest investor if more than two are involved. General Motors applauded the policy as more transparent and predicted it would result in a healthier industry, despite the fact that new licensing policies designed to limit the number of vehicles will result in higher prices and lower sales.

6. India Automobile Policy v/s China Automobile Policy As we discussed the policies of both the nations in paper, now we see the current standing of both the nation and factors which can effect in positive manner for both the countries. The fundamental for both the countries are same 1. Large population- China is worlds largest populated country and India is second largest populated country. So the factor is still the same for both. 2. Low car ownership rates- the ownership rate is called as ratio of 1 car to number of person. Both governments have motive to increase this ratio. In India, this ratio is around 6 cars against 1000 persons and in china its around 7 cars against 1000 persons. 3. Growing GDP per head- This is beneficial outcome for government to maximise the purpose of increasing GDP.

The Comparison between China and India situations:

China Second largest auto market: 8million units/year VM production mainly as JVs with MNCs: product IP resides with the MNC Products derivative or even seen as copies of Local innovation cheap Emerging market existing products vehicles the global industry is watching India 9th largest auto market: 2million units/year Local VMs with own brands and IP

Limited vehicle exports to date domestic Some VMs establishing India as a global consumption dominates Weak indigenous supply base - many JVs with MNCs in auto components Developing an engineering capability Strong tradition and capability in Engineering: source of low-cost vehicles; local brands also exporting Strong (but fragmented) local automotive supply industry

Inbound companies typically have to form JVs. More freedom to enter a market without Within the JV some activities are owned by the forming a JV Chinese JV

North America the main destination of component Europe the main destination of components exports Strong in Electronics (in all sectors) exports Strong in castings, forgings, metal components and assemblies; also software SOURCE: 7. ( w a l l b a n l ) Above charts shows the advantages of both the nation into their expert field. According to me, India has more potential to grow but the US-China relation makes china condition easier. The comparison between two of them is tough because both nations is different in their automobile industry.

India v/s china which economy is better?

An economic condition played a most crucial in implementation of any polices. A comparison that economists and some business experts make between Asias two rising economy, China and India, China nearly always comes out on top. The Chinese economy historically outpaces India's by just about every measure. China's fast-acting government implements new policies with blinding speed, making India's fractured political system appear sluggish and chaotic. Beijing's shiny new airport and wide freeways are models of modern development, contrasting sharply with the sagging infrastructure of New Delhi and Mumbai. And as the global economy emerges from the Great Recession, India once again seems to be playing second fiddle. Pundits around the world laud China's leadership for its well-devised economic policies during the crisis, which were so effective in restarting economic growth that they helped, lift the entire Asian region out of the downturn. Now, however, India may finally have one up on its high-octane rival. Though India still can't compete on top-line economic growth the World Bank projects India's gross domestic product (GDP) will increase 6.4% in 2009, far short of the 8.7% that China announced in mid-January India's economy looks to be rebounding from the downturn in better shape than China's. India doesn't appear to be facing the same degree of potential dangers and downside risks as China, which means policymakers in New Delhi might have a much easier task in maintaining the economy's momentum than their Chinese counterparts. "The way I see it is that the growth in India is much more sustainable" than the growth in China, says Jim Walker, an economist at Hong Kongbased research firm Asianomics. India's edge is due to the different stimulus programs adopted by the two countries to support growth during the downturn. China implemented what Walker calls "the biggest stimulus program in global history." On top of government outlays for new infrastructure and tax breaks, Beijing most significantly counted on massive credit growth to spur the economy. The amount of new loans made in 2009 nearly doubled from the year before to $1.4 trillion representing almost 30% of GDP. The stimulus plan worked wonders, holding up growth even as China's exports dropped 16% in 2009. But now China is facing the consequences of its largesse. Fears are rising that Beijing's easy-money policies have fuelled a potential property-price bubble. According to government data, average real estate prices in Chinese cities jumped 7.8% in December from a year earlier the fastest increase in 18 months. The credit boom has also sparked worries about the nation's banking system. Many economists expect the large surge in credit to lead to a growing number of nonperforming loans (NPLs). In a November report, UBS economist Wang Tao calculates that if 20% of all new lending in 2009 and 10% of the amount in 2010 goes bad over the next three to five years, the total amount of NPLs from China's stimulus program would reach $400 billion, or roughly 8% of GDP. Though Wang

notes that the total is small compared with the level of NPLs that Chinese banks carried in the past, she still calls the sum "staggering." Policymakers in Beijing are clearly concerned. Since December, they have introduced a series of steps to cool down the housing market and restrict access to credit by, for example, reintroducing taxes on certain property transactions and raising the required level of cash that banks have to keep on hand in an effort to reduce new lending. India, meanwhile, isn't experiencing nearly the same degree of fallout from its recession-fighting methods. The government used the same tools as every other to support growth when the financial crisis hit cutting interest rates, offering tax breaks and increasing fiscal spending but the scale was smaller than in China. Goldman Sachs estimates that India's government stimulus will total $36 billion this fiscal year, or only 3% of GDP. By comparison, China's two-year, $585 billion package is roughly twice as large, at about 6% of GDP per year. Most important, India managed to achieve its substantial growth without putting its banking sector at risk. In fact, India's banks have remained quite conservative through the downturn, especially compared with Chinese lenders. Growth of credit, for example, was actually lower in 2009 than in 2008. As a result, economists see continued strength in India's banks. A January report by economic-research outfit Centennial Asia Advisors noted that based on available data, "there was no sign that domestic banks' nonperforming assets were deteriorating materially." Nor do analysts harbour the same concerns that India's monetary policies are sending prices of Indian real estate to bubble levels. "India's growth, though less stellar, does have the reassuring factor that the [risks of] asset price bubbles are less," says Rajat Nag, managing director general of the Asian Development Bank in Manila. (Suhuman, 28) India maintained robust growth without Beijing's hefty stimulus in part because it is less exposed to the international economy. China's exports represented 35% of GDP compared with only 24% for India in 2008. Thus India was afforded more protection from the worst effects of the financial crisis in the West, while China's government needed to be much more active to replace lost exports to the U.S. More significantly, though, India's domestic economy provides greater cushion from external shocks than China's. Private domestic consumption accounts for 57% of GDP in India compared with only 35% in China. India's confident consumer didn't let the economy down. Passenger car sales in India in December jumped 40% from a year earlier. "What we see [in India] is a fundamental domestic demand story that doesn't stall in the time of a global downturn," says Asianomics' Walker The Indian economy is not immune to risks. The government has to contend with a yawning budget deficit, and last year's weak monsoon rains will likely undercut agricultural production and soften rural consumer spending. But rapid growth is expected to continue. The World Bank forecasts India's economy will surge 7.6% in 2010 and 8% in 2011, not far behind the 9% rate it predicts for China for

each of those years. Indian Prime Minister Manmohan Singh, when speaking about his country's more plodding pace of economic policymaking, has said that "slow and steady will win the race." The Great Recession appears to have proved him right.

Problems of Automobile Industry: India and China

The development of any industry has many problems always. Here, we discussed the problem of automobile industry in China and India respectively. 1. In china, the problem was over protective nature of government policies issued for industry. China does not want any outsider to hold strong position inside china. By which, they lost some manufacturer but now china is more sufficient. The export and import level of china is most important. Otherwise rules and regulation held by china is not tolerable sometime. ( W a l l b a n l) 2. The insecurity of intellectual property rights was next big problem. Now, World knows the power of making duplicate products in china industry. Due to which many manufacturers lost their brand value and financial losses. This should be taking care of by china otherwise they can have serious losses in future. 3. In India, The stereotype problem of automobile is Infrastructure and manpower. The country has slow growth and many areas are still rural. So proper infrastructure given by India is not adequate. No One can start business just like this. Every unit came up with some plans but if infra is not there nothing is there. The manpower is still prevails in India even having 2nd largest population. The main problem is industry need skilled labour and educated too. But India have low literacy rate as compared to china even. 4. The next big problem is taxation and business environment. India is one of the nations who taxed income of producer and consumers in large extent. So manufacturing units sometime has problem to pay huge amount of tax. Next business environment problem like rising input prices and appreciation in rupee. The over prices of raw material is not beneficial for government and producers. The change is needed in whole structure.

Recommendation to Indian Automobile Industry

The study between Indian and Chinese Automobile Policies helped me to deliver some recommendation to India. The growth of auto industry in India will be contingent not just on domestic demand, but also equally on exports. Therefore, the present projections will become a reality if thrust is given to original research that will yield breakthrough results. These results help in addressing the current global concerns such as environment, fuel efficiency, need for alternate and renewable fuels and materials etc. 9. (Kolaskar) This can happen only through a consortium approach where various auto companies and academic institutions work together as in the case of IT hardware industry. The consortium approach should be extended to address the trained human resource shortage as well. The government should act as a facilitator by bringing about necessary changes in the current laws that will encourage private participation. Finally, there should be mechanisms in place that will ensure that there is a balance in the pool of human resources comprising research scientists, managers, engineers, designers, technicians, and skilled and semiskilled worker. The factor given to boost the economy is important. The India needs to capture the speed and strategies which china followed till now. Before they open up their economy fully but now those again setting policies to control foreign investment and support local producers.

7. Automotive Mission Plan 2006-2016 Indias Automotive Mission Plan (AMP) 2006-2016 is a collaborative effort between the Indian government, the automotive industry, and academia. The stated vision of AMP is for India to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of U.S. $145 billion accounting for more than 10 percent of the GDP and providing additional employment to 25 million people by 2016. India is currently the eleventh largest passenger car market in the world and aims to be the seventh largest market by 2016. While the auto industry has experienced strong growth over the past decade, it still plays a small role in the global industry. According to AMP, India has about 2.37 percent of the world production of passenger and commercial vehicles and exports from India contribute approximately 0.3 percent of the global auto trade. The AMP makes a number of suggestions for actions to be taken by both the government and industry in order for India to fulfil the goals laid out in the plan. For example, they estimate an investment of approximately $35-40 billion in the auto sector over the 2006-2016 times period will be required to implement AMP. The governments responsibility would be to facilitate infrastructure creation, promote the countrys capabilities, create a favourable and predictable business environment, attract investments and promote R&D. Industrys responsibility concerns issues such as designing and manufacturing quality products, improving productivity, maintaining costs, among others. AMP also calls for the formation of an appropriate development policy; improving road, rail, port, and energy infrastructure; expanding demand for Automobiles domestically; and, developing a roadmap to address environmental and safety Concern.

8. Conclusion India and china are neighbour country but their strategies and polices are different. China set free themselves for market policies after India. Today they came in list of super powers. The conclusion, I would like to draw is India should work on policies again and restructure on steps of china. China is closing doors for foreign investment by policies of 51% allowed FDI in country. India still making policies regarding making India a better investment nation. Indian government have to make polices which is fast in action and have some control on foreign investor to tackle in India. The continuous flow of foreign companies and investment can create national threat. This also demotivates the domestic producer like HML and PAL motors. The previous decades players no were standing in todays market. The Indian government should come up policies which protect the domestic producers and experts. Otherwise, no Indian producer of automobile products left in industry. Government concentrated on more foreign players but I suggest more Joint ventures should be there to maintain the importance of domestic players. The government should also take of tariff polices. They also make losses of billions of Indian government. India has the potential and ability to come up with maximum production of vehicles because we have all the resources and key factor required to set up manufacturing plant. Further India should concentrate on passenger cars and two wheelers segment. These two are most demanded and exportable products.

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