NEW DELHI: Auto sector, which accounts for 7% of India’s GDP, cautioned that concessions given under the long-pending India-EU Free Trade Agreement (FTA) could dent the government’s ‘Make-in-India’ initiative.
The India-EU FTA summit was held in May 2013 and both parties failed to reach an agreement. The EU wants India to drastically lower customs duties on automobiles ranging from about 80% in small cars to 130% in luxury vehicles, along with similar steps in components, wines and spirits.
The demand of the EU to reduce import duties on fully imported vehicles will not only impact employment in the sector but will also be unfair to automobile makers from Japan, Korea and the US, which have made huge investments in India.
According to Sugato Sen, Director General, Society of Indian Automobile Manufacturers (SIAM), the trade body has been consistently talking about keeping 20 tariff lines out of all FTAs and the government of India has so far supported this position. “SIAM hopes that the position will be maintained in the case of India-EU FTA too.”
The 29 items concerning auto sector in the negative list include 16 different types of vehicles, including two-wheeler, and four different types of engines. According to auto experts, giving in to the demands of EU in the auto sector could result in lower inflow of foreign investments in the key manufacturing sector. “One of the main reasons for having a high import tariff on imported vehicles is to encourage firms to manufacture in India and is not about protecting the domestic industry. Once that is reduced, why would they set up manufacturing base in India?,” said a company official. He added that this will thus run contrary to the ‘Make in India,’ initiative.