Development of Indian Automobile Sector: Impact of Japanese Fdi

India is an emerging economy which has witnessed unprecedented levels of economic expansion, alongside China, Russia, Mexico and Brazil. India is a cost effective and labor intensive economy, and has benefited immensely from outsourcing of work from developed countries, and has a strong manufacturing and export oriented industrial framework. Since initiating its economic reform in 1991, India has continued its transition from a closed and planned economic policy toward a path of liberalization.

As a result India has achieved stable economic growth averaging 6% annually , gradually enlarging its presence in the world economy. Now, India is one of the major recipients of FDI. According to UNCTAD (2008), India has emerged as the second most attractive destination for FDI after China and ahead of the US, Russia and Brazil. The policy of reforms followed by Government of India in the post-1991 period has increased inflow of foreign capital in the industrial & economic development of the country.

Foreign capital inflow is encouraged not only as source of financial capital but also as a tool of knowledge and technology transfer. Since initiating reform in 1991 India has continued its transition from a closed and planned economic policy toward a path of liberalization. Cumulative amount of FDI in India from April 2000 to April 2011 has reached US$ 197,935 million. INDIAN AUTOMOTIVE SECTOR Automotive Industry, globally, as well in India, is one of the key sectors of the economy.

Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and acts as one of the drivers of economic growth. Indian automotive industry produces a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motor-cycles, three wheelers, tractors and other agricultural equipment etc. It is estimated that the total turnover of the automotive industry in India would be in the order of USD 122-159 Billion in 2016.

Because of this growth potential automobile sector is attracting FDI from renowned car makers from around the world. The liberalization of governance policies with regard to FDI in Indian automobile industry has resulted in the rapid growth of this industrial sector post 1993. The major global players in the automobile industry have invested in the Indian vehicle manufacture as well as auto component part manufacture. The major foreign players who have a significant role in the development of Indian automobile industry include the following:

Ford from USA DaimlerChrysler AG from Germany General Motors from USA Suzuki from Japan BMW from Germany Honda from Japan Renault from France ?? Toyota from Japan? JAPANESE FDI IN AUTOMOTIVE SECTOR Automobile sector is largest recipient in terms of Japanese FDI in India. In recent years, most of the leading Japanese automotive manufacturers have entered the Indian market in the two wheeler, passenger cars and commercial vehicle segments. Suzuki, Toyota, Nissan and Honda are few famous names which have invested in India. IMPACT OF JAPANESE FDI Since the investment of Suzuki in 1980s, Indian automobile sector has developed a lot.

And after initiation of liberalization process, this process has got momentum as lots of international players have entered the scene. However, it can be said that Japanese company Suzuki saw potential in Indian market much before other big player. It has played important role not only in the growth of the auto industry, but also in the development of supplementary auto-component industry. In this scenario, my thesis will try to analyze the impact Japanese FDI have in the auto- sector. How beneficial has the Japanese FDI been to the Indian automobile industry?

More precisely, has FDI been helpful to the productivity growth in this sector? Has there been enough technology transfer as expected? How much employment opportunity has been created? How Japanese FDI has helped to develop auto- component industry? My thesis will deal with these questions. RESEARCH METHODOLOGY Research will be based on secondary data. Research papers, news articles and related books will be used as source of information. Related websites will also be taken for references. Data from organizations like UNCTAD, JETRO, JBIC and DIPP will be used for analysis.