Addressing Structural Bottlenecks Key To Exports Boom
BMI View : While Indian auto exports have grown spectacularly in the past few years, absolute volumes are still low, a phenomenon we believe infrastructure bottlenecks are responsible for. In our opinion, some critical areas that need investment are additional dedicated ro-ro facilities, ancillary port services and robust road and rail infrastructure, which will improve the connectivity between vehicle production facilities and ports.
It has been BMI's long-held view that India can be an Asian auto exports hub in its own right given its inherent advantages of skilled labour and low-cost manufacturing. Furthermore, we have highlighted for some time that it is imperative for carmakers to boost their exports in the current environment of depressed domestic sales so as to give some respite to their falling earnings and take advantage of the weaker Indian rupee at the same time.
It is also in the government's interest to ensure trade remains vibrant in the auto sector given India's recent economic woes as well as its stubbornly high current account deficit, which has made foreign investors nervous about investing in the country. However, structural bottlenecks have continued to plague exporters and in this piece we examine the necessary improvements required to attract more export-oriented investment in the sector.
|Infrastructure Bottlenecks Evident|
|India - Individual Automobile Segment Exports, Units (LHS); Total Exports, Units (RHS)|