Indian Economy Indian Industries

Location Factors behind Automobile Industry and Its Growth Trend in India

Auto industry consists of manufacturing of Moped to Harvesters. It is an indicator to economic growth in real terms because healthy and growing automobile sector indicates overall growing economy, agro-economy, good roads, rising income and employment. The industry currently employs 13 million people and contributes nearly 6% of National GDP.

Locational Factors that affect Automobile Industry

  1. It tends to be located near iron and steel producing centres because steel is the basic raw material used in this industry.
  2. Port sites are also found to be favourable because of import and export facilities offered by such places.
  3. Market nearness, generally in outskirts of urban areas to reduce transport cost and onsite assembly.
  4. Under the government plan of decentralization of industries, some locations in remote and industrial backward areas are given priorities.
  5. Skilled labour and employees and their discipline (Esp. in north India) because of protest, political delays, and trade level unions have discouraged automobile industries.
  6. Government assistance like soft loans, lands for SEZ (Special Economic Zones), relaxed labour laws, electricity, tax holidays and setting up of diploma colleges nearby.
  7. Geography and culture plays a major role, like in Madhya Pradesh and Haryana major auto production is more focused on Agro-Heavy equipment like tractor, harvesters, threshers and sorters.
  8. In urban areas major focus is on two wheeler and four wheeler based on the income of the people.
  9. Demography of an area nearby based on youth, middle age, poor and rich etc.

Growth trends after 1990s is positive and encouraging. However, before that we had MRTP act to resist any private company by restricting their output. Though the intent was good that is the will of the Socialism and no monopoly of one company, but the results were discouraging for the market economy.

After 1991 due to market liberalization, FDIs (Foreign Direct Investment) and foreign MNCs (Multi National Companies) invested heavily leading to Automobile and IT (Information technology) boom in India.

In current scenario, even though per-capita income is increasing, however, along with that awareness among society related to various environment pollution is also increasing. It is moving towards more green vehicles and their market setup especially in Urban India. The government policies are now inclined to support more public transport system, car pooling and share taxis which may result in the decline in overall demand for the Automobile industry in future.

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