SIAM issues white paper on EU-FTA, advises caution

April 9, 2013: The Society of Indian Automobile Manufacturers (SIAM) has issued a white paper on the opening of the automotive sector in the context of the EU-India Free Trade Agreement (FTA) talks.

The apex industry body says it believes that India needs to be extremely cautious of such a move during the industry’s development phase given that it would affect investments and employment. SIAM has urged the government not to abandon its longstanding policy of giving market access through the investment and manufacturing route.

According to SIAM, the negative impacts of India-EU FTA will be as follows:

It will curtail investments in automotive manufacturing in India and therefore the creation of jobs.

• It will severely distort domestic competition.
• It will hurt domestic value addition and technology.
development and, therefore, the auto components sector. .
• It will increase imports of fully built cars or CBUs and as a consequence increase trade deficit and, with lower investment, could significantly expand India’s current account deficit.

While the 2013 Union Budget has proposed that duties on imported cars be increased to 100 percent, there have earlier been remarks by Praful Patel, Union heavy industries minister, about the cutting of rates on CBUs as part of the EU-India FTA in the range of 30-45 percent.

The inclusion of automobiles in the EU-India FTA has been a longstanding subject of discussion with the EU expressing its reluctance to go ahead with the agreement unless it includes automobiles. If the proposal were to get the green signal, it would a boon for the German luxury car trio of BMW, Audi and Mercedes.

SIAM had earlier indicated that Japanese companies have been asking for a level-playing field as well. The association says that if India has to sustain the long-term growth of its automotive sector and fulfill the targets of the Automotive Mission Plan (AMP), the Indian government should say “no auto at any cost”.

SIAM, meanwhile, will meet tomorrow to release the sales figures for the fiscal year 2012-13. In January 2013, the industry body had said that passenger cars would grow by between 1-3 percent and the sector as a whole by 3-5 percent.