The automobile sector has been a very large creator of new jobs in the economy. Almost 50% of the manufacturing activity comprises of automobiles and directly related activities. Besides the direct employment arising from production of automobiles, and components, the vehicles sold each year combined with the total vehicle population, create a very large number of jobs in the services sector to sell, finance, insure, maintain and meet the regulatory requirements for the vehicles. The number of drivers alone required each year by the currently 3 million cars being sold would be in the region of 750,000. Commercial vehicles create a large demand for drivers and helpers. The extent of automation in the automobile industry is growing and is required to attain competitive quality and costs. Export of cars is also an important objective, partly to create jobs and partly to earn foreign exchange and establish India as a country that can manufacture high quality engineering products.
The automobile industry is now entirely in the private sector. Till 1992, Maruti Udyog Limited was a PSU, with Suzuki of Japan having 40% equity. In 1992, the shareholding changed to 50% each held by Government and Suzuki, and by 2007, Government exited the company totally. The industry has grown rapidly in the last 20 years. In 1996-97, passenger vehicle output was about 400,000 units. This number will cross 3 million this year. India is the largest producer of two wheelers, and commercial vehicles provide an essential lifeline to the economy. The component industry has an output of US$ 44 billion, with exports of near US$11 billion.
A very large percentage of the jobs created in the services sector arise directly or indirectly as a result of manufacturing activity
The growth of the automobile industry leads to the development of many other industries. Steel is a major input required for car production, and the need for making cars lighter, safer and more durable has led to the development of various specialized varieties of steel. The growth of the automobile industry is also accompanied by the growth of the petroleum refining and distribution industry. Large number of jobs are created as a result. The consumer demand for safer, more fuel efficient and cleaner cars is also driving technology development in many areas including rubber, polymers, electronics, fuels and so on.
The close linkage between the growth of manufacturing, and the high generation of employment in the services sector, leads to the need for innovative thinking on the policy front. The bulk of competitive manufacturing will have to be in the private sector, given the global experience with the public sector trying to be competitive. However, the private sector, during the period 1950 to 1991 was not the driver of industrial growth, but was highly regulated and controlled. Even after 1991, Government policies, both at the Centre, and more so in the States, did not recognize the importance of the private sector in accelerating manufacturing and creating jobs. In several areas, industrial activity still gets the lowest priority in allocation of economic resources. Prices of electricity, and priority in supply, is a good example. Regulatory activities have been very extensive, but these have mostly added to the cost of manufacturing, without any real value creation. To an extent, political considerations have been relevant in perpetuating this attitude towards the private sector. The result, however, is that manufacturing and mining activities have not grown faster and have languished for long at 15-16% of GDP. India cannot remove poverty, have inclusive growth and create jobs unless the attitude toward the private sector changes, and the importance of Government working with that sector to accelerate growth is recognized as a national necessity, and not as a political liability. Manufacturing activity should rise to 35% of the GDP.
R C Bhargava, Chairman, Maruti Suzuki India writes this piece for FICCI publication “Economy of Jobs”. Post continues on Page 3.