Indian Automotive Industry
In the early 21st century, with the original four Asian Tigers at or near to fully developed status, attention has increasingly shifted to other Asian economies such as China and India, which are experiencing rapid economic transformation at the present time and are thus leading a sort of redistribution of the epicenter of global innovative activities. Not only so, it is also being widely contended that these emerging new economies that have already shown capacities to alter the balance of the international division of labour in their favour i.e. demonstrated capabilities which might drastically change the world’s technological map. The apparent tendency is conjectured to have risen from some substantial amount of cumulative deepening and technological upgrading of the enterprises (at least in some industries, if not all) within these economies. India initiated economic reforms, beginning in the 1980’s, which became comprehensive in the early 1990’s. The reforms included significant liberalizations of the external control regime, opening up for increased imports and for foreign investments. The manufacturing industry has evolved; being chiseled by India’s liberalizing trade and investment regimes on the one hand, and the structural readjustments from within (propelled mostly by the changes in global industry), on the other. Several authors have documented the technological learning processes in Indian firms in a spectrum of industries (e.g., Kale and Little (2007) in pharmaceuticals, Arthreye (2005) in software industry, Parhi (2006) in the automotive industry). The broad aim of this section is to discuss the changing forms of innovation in Indian automotive firms over the last few years. Starting with a broader contextual view of the automotive sector, to give a flavour of the general industrial environment, we will analyze the specific case of auto components industry which has shown remarkable success over the last two decades. The chapter will build on two distinct but inter-dependent parts: a historical analytical part (drawing mostly on existing literature) to understand the genesis and development path of the industry through the changes in policies/institutions; and an econometric analysis of quantitative and qualitative data to understand the nature and extent of capability building processes at the firm level in the automotive industry. The plan for this section is as follows. In the next sub-section I present the general industrial and economic environment of automotive industry by providing its evolutionary pattern since independence and presenting how technological capability of this industry has evolved through various decades. I also discuss general industry trends in this sub-section. Data, methodology, empirical model and results are discussed in following sub-section. Finally, the last sub-section summarizes the main findings and provides policy perspectives of the results.
Evolution of the Indian Automotive Industry: From Statics to Dynamics This sub-section presents an evolutionary analysis of Indian automotive industry’s growth over the four decades since independence. The evolution of India’s automotive industry from a fairly static/slow-paced growth (from 1940s till 1980s) to the recent impressive showing of dynamism owes formidable precedence to history. If one fishes through the not-so yet impressive documentation of Indian automotive industries’ wholesome development since independence in 1947, one would most certainly huddle with either political surmise of industrial developments or a development (or sometimes industrial) economists explanation of the industry’s evolutionary characters. So far, most of the prologues on India’s automotive industry’s development story have been written by economists with industry as specialization or by development thinkers with a political economy bent of mind. I do not have specific preference for either as I would choose to...
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