With auto sales booming in the first half of 1999 at more than 40% higher than the last quarter, India seems to be in the midst of a domestic automotive revolution but may miss a much greater global opportunity offered by the world auto industry. The gross turnover of the auto companies who are investing in India like Suzuki, GM, Ford, Mercedes-Benz, Toyota, Fiat, Honda, Daewoo, Hyundai, Volvo, and their ancillaries, will be about US $ 1200 billion (Rs. 5,160,000 Crores) or about four times India's GDP. These companies and their vendors who are investing some Rs. 40,000 Crores into their Indian projects are, therefore, a bigger economic opportunity than any single nation or commodity.

If India can export components and ancillaries to get just 1% of their total imports, India would earn roughly Rs. 150,000 Crores and more than double its present exports. At one stroke it could solve many of India's economic ailments. And, the easy part is that if Indian suppliers can find a way to meet the needs of one auto company, they would be equally attractive for all the others as well.

The world Auto industry make about 37 million cars, 18 million trucks and busses and 20 million motorcycles and scooters a year. It is the world's largest manufacturing industry. It was mainly the auto industry that drove USA to prosperity in the 20th century. It was also the main engine for the economic recovery of Germany, Japan and Korea after their wars. In India, however, our political leaders ignorant about industry and influenced by ideals of Gandhian simplicity committed economic suicide by crushing India's infant auto industry with excessive regulation and taxes.

What they did not realise was that a car is a phenomenal spinner of indirect employment. Maruti Udyog Limited (MUL) has only 5000 employees making 3,50,000 cars a year. But there is a multiplier of over 20 times more permanent jobs to support this production in their raw materials and ancillaries as well as in the delivery, service, spares, tyres, accessories, finances, lubes, fuel, etc.

Each permanent job also has a huge employment multiplier for those who provide the salary earners with food, clothing, shelter and other services. When a new auto plant is established in a backward area like Surajpur in UP, or Sriperampudur in Tamilnadu, a few local people get jobs but there is a much bigger mushrooming of tea shops, stores, hotels, houses for rent, schools, butchers, bakers, tailors, masons, carpenters, tent houses, etc.

It has been estimated that 17% of all jobs in America are directly or indirectly connected to the auto industry. Australia understood the significance of the auto industry in 1984 and created the post of the PM's Special Automotive Envoy to spearhead their thrust to reform their Auto sector. To boost the auto industry they have been bringing down taxation from about 66% in steps every year to a target of 10% and have significantly increased the exports of cars and components despite liberalising imports. No car any longer belongs to any country but are assembled with components from many.

This year, India will make 600,000 cars and off-roaders, 250,000 trucks and busses and 3.5 million 2-wheelers but this market would be far bigger if the customers did not have to pay a crippling cascade of customs, octroi, sales and other taxes. These add over 75% to an average car's manufacturing cost. If the cumulative taxes were at about 15-20 % as in many countries including Korea and Thailand, the Indian market would grow phenomenally and spur huge economic, technological and employment growth.

India attracts automakers because of its market potential and because it is one of the very few developing countries that has a mature steel Industry and the world auto Industry needs huge quantities of high quality and high value castings, forgings, sheet metal, gears, shafts and other parts. A German worker in a mildly polluting and hazardous industry like a foundry for castings and forgings earns about $50 to 60 per hour. He earns about $30 in USA and $15 to 18 in Korea. In India the cost is less than $1 an hour. But, the customs duty on the CNC and other machines needed to shape these, burdened by heavy customs and taxes, diminish the advantage. Most auto-makers also like India because it has excellent engineers and managers, communications in English and a level of legal comfort.

The world auto industry demands uncompromising precision in quality and deliveries. India's factory practices and obsolete labour laws make this difficult. Premier Automobiles Limited was crippled by an unprincipled strike and the delay killed Peugeot's interest and nearly ended Fiat's big project. If Pal-Peugeot, HM or Standard Motors could have retrenched their surplus workers, new projects would have created new jobs opportunities. India will have to make conditions where managements can manage and workers have to work. An urgent streamlining of obsolete labour laws is essential.

India's Auto policy also contains several unnecessarily restrictive clauses. Many more auto companies would be interested in India if we were more flexible about the indigenisation to 50% in 5 years and 70% in 7 years which is becoming beyond the capabilities of many luxury car makers who are not producing in sufficient volumes. As long as they have to export cars or components to match their imports indigenisation will be rapid.

If India cannot develop a seamless system to integrate the priorities of all the many conflicting states, ministries and interest groups it will miss a golden opportunity to vault quickly into a future of huge opportunity.