India must urgently improve its infrastructure and reform its tax, land acquisition and labour laws if it is to fulfil its ambition of becoming a leading international automotive manufacturing hub, global carmakers said on Friday. New right-wing prime minister Narendra Modi invited investors last month to "Come, make in India" as part of a drive to create manufacturing jobs for a ballooning young population. But automobile executives warned at the annual meeting of the country's biggest vehicle industry group that India must create a better business climate swiftly or risk losing out to emerging market rivals like China.
"India has an opportunity to build a globally competitive (automotive) industry," but to realise its full potential, the sector needs "a clear roadmap", GM International president Stefan Jacoby said. The country needs to streamline taxes that vary state-to-state, ease rigid hire-and-fire laws and set internationally harmonised fuel-emission, safety and other norms, speakers told the Society of Indian Automobile Manufacturers (SIAM). India must also modernise its creaking rail, port, road and other infrastructure and ease bureaucratic red tape.
"Logistics and infrastructure are a clear disadvantage of the country," said Takashi Hata, senior vice-president of Japan's Nissan Motor Co. "There's an urgent need to improve the general infrastructure - spanning from roads, harbours, railways to electric power and water supply," added Fumihiko Ike, chairman of India's Honda Motor.
Foreign automakers made a beeline for India in the last two decades, seeking to tap a vast market in the country of 1.25 billion people and leverage its low workforce costs to use the country as an export springboard. Just 17 out of every 1,000 Indians own a car, compared with 800 out of every 1,000 in the United States, according to industry figures.
But automakers have found India's infamous red-tape and shabby infrastructure daunting. Many global firms are keen to establish operations in India but they encounter problems obtaining business permits, acquiring land and getting plant construction clearances. "There are a number of challenges confronting automakers doing business here," said Honda's chairman who is also chairman of the Japan Automobile Manufacturers Association (JAMA). Creating a vibrant automotive sector is key to helping generate new jobs for the estimated 10-12 million Indians who enter the workforce annually.