Meanwhile component exports have grown from $4.2 billion in 2009-10 to $11.2 billion in 2014-15, according to the Automotive Component Manufacturers' Association of India, which translates into a compounded annual growth rate, or CAGR, of 28 per cent. During the same period, imports of components have reported a CAGR of 11 per cent, which has narrowed the gap between imports and exports. In 2009-10, imports of components exceeded exports of such items by $3.8 billion. This excess of imports over exports declined to $2.38 billion in 2014-15. Among regions, Europe is the largest destination for exports (36.39 per cent of the total), followed by Asia (25.29 per cent) and North America (23.25 per cent). And among countries, the United States is the largest importer of Indian components accounting for 22.35 per cent of the total, followed by Germany (7.51 per cent) and Turkey (6.49 per cent). This shows that the market for Indian components is fairly diversified. One reason for this is that Indian companies have over the years benefitted from their experience of dealing with all kinds of car makers in the country: Japanese, Korean, European and American.
The components industry saw a paradigm shift in the 1980s when Maruti Suzuki brought with it Japanese quality standards and work practices. This trend got reinforced when Japanese two-wheeler companies like Honda, Yamaha and Suzuki set up base in the country. Indian component makers, to their credit, took to the Japanese way with alacrity. In the 1990s, when car makers from other countries came to India they found a well-established components industry that could meet their demands. That is when India's "frugal engineering" skills started being talked about, and companies decided to make India a hub for the production of small cars.
The success of the Indian components industry shows the benefits of a liberal foreign investment regime. No protection was ever offered to Indian companies. In fact, after India signed a free trade agreement with Thailand, many said it would finish the Indian components industry - but nothing of that sort has happened. It is just their efficiency which has made car makers substitute imported components with those produced locally. There is no reason why the success of the components industry cannot be replicated in other sectors, especially defence.