Factors Affecting the Demand and Growth of the Auto Sector in India

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Factors affecting the demand and growth of the auto sector in India

The automotive sector is one of the core industries of the Indian economy. Indian Government’s impetus to the industry by allowing continuous economic liberalization since 1991 has made India one of the sought after destination for many global automotive players. The automotive sector in India is growing at around 18 per cent per annum. Indian Auto industry has seen a phenomenal growth in the last 20 years. This is due to the convergence of a lot of positive factors. This article aims to examine at some of these to understand the situation better.

The sales trajectory of automobiles has witnessed a sharp increase since 1990s till 2000. Automobile industry has greatly benefitted from a sharp increase in demand and has added extra capacity, better research and development facilities and technological advancement and distribution setup across the country. Factors contributing to the increased demand of automotives and the growth of Indian Auto sector The convergence of government policies, economy’s growth, people’s purchasing power have all contributed to the phenomenal growth of Indian Auto industry. Some of the important growth drivers are explained below. Rise in the industrial and agricultural output indirectly helps Indian Auto industry Industrial and agricultural output increase has reflected in higher GDP and overall growth of the economy which is about 9% in the last three years. Higher GDP means more purchasing power. Sales of vehicles for domestic and commercial consumption have seen high growth in these three years too. Growth in the road infrastructure increases demand for vehicles Indian highways and roads have improved a lot in quality and connectivity in the last 20 years. Projects like the Golden Quadrilateral aim to make even remote areas accessible by road. Some of the National Highways are of international standards. This has made road transport a viable, cost effective...
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