Automobiles drive industry to success

ECONOMIC SURVEY 2005-06\ MANUFACTURING

Impressive 8.9% growth in 2005-06 despite a poor show by mining, power sectors.

The Indian automobile industry is likely to attract an investment of Rs 30,000 crore in the four years to 2007, according to the Economic Survey.

The industry also offered substantial scope for gainful employment "" 4.5 lakh directly and about 1 crore indirectly.

The sector has maintained a steady annual growth of over 15 per cent in the last four years.

"The industry had an estimated investment of nearly Rs 50,000 crore in 2002-03, which is expected to go up to Rs 80,000 crore by the year 2007," says the Survey.

The turnover of the automobile industry exceeded Rs 92,500 crore in 2003-04, and including the turnover of the auto component sector, it may have well exceeded Rs 144,000 crore.

Exports of automobiles as a proportion of the total production have increased from 2.9 per cent in 1999-2000 to 8.9 per cent in 2005-06.

The automobile sector symbolises the industrial recovery that commenced in the second quarter of 2002-03.

The rate of growth of the industrial sector, in terms of the Index of Industrial Production (IIP), during April-December 2005-06, was 7.8 per cent compared with a growth rate of 8.6 per cent in the corresponding period of 2004-05.

The target growth of industry during the Tenth Plan (2002-07) was put at 10 per cent, consistent with an overall gross domestic product growth of 8 per cent.

However, "notwithstanding a distinct improvement in the manufacturing growth in the last two years, overall industrial growth so far has remained well short of the target", says the Survey.

Deceleration in the growth of mining and electricity sectors in the current year may put added pressure on the manufacturing sector to maintain overall industrial buoyancy.

The performance of the manufacturing sector has been impressive. It grew at 8.9 per cent during this period. A moderate deceleration of 0.8 percentage points in the growth rates of IIP in the current year was due to a decline in the growth rates for mining and electricity sectors.

Decline in the rate of growth in the mining sector from an average of 4.4 per cent in 2004-05 to 0.4 per cent in the current year so far was partly due to a fall in the levels of crude oil production as a result of a fire accident in July 2005 at Mumbai High.

The electricity sector also witnessed a moderate slow-down in the current year, which can partly be attributed to a shortage of gas and coal. Inadequate investment in these two sectors affected the capacity additions and contributed to this shortage.