Mutual Industries is not in favour of a free trade agreement with China at this point of time. The manufacturing sector of China is considerably stronger on account of the economic reforms that the country has more or less fully implemented over the last 20 years. Besides, we have reason to believe that they are keeping their currency undervalued deliberately in order to give benefit to exports.
On the other hand, India is dragging its feet in respect of balance of reforms which are on hold on account of political considerations. We need to open up our banking sector without which it would be difficult for us to put through overambitious plans for building physical infrastructure.
SETTING IT RIGHT
We need to open up our mining sector fully and have to take effective steps to rejuvenate our agriculture with massive investment on irrigation projects. In our GDP growth of 8-9 percent, agriculture accounts for hardly two percent. This needs to be stepped up to a minimum of five to six percent. We should first put our house in order before opening up our economy to China through FTA. We at Mutual entirely agree with ACMA’s views that auto components should be put into the negative list in the light of the above.
China certainly has great potential as a market. In our opinion, we would be much better off making investments in China under joint ventures with the new class of young energetic and enlightened entrepreneurs in order to take full advantage of their fast growing market for all kinds of automobile products.
Indian businessmen would be better off looking for strategic alliances with Chinese entrepreneurs who are looking at support for technology. We should try to win them over from European or American technology providers. All Indian companies with sound technology, low costs and deep pockets should look at China as an investment destination.
We are not aware of any challenges or issues in Indian companies setting up shop in China. In fact, we believe more and more Indian outfits are finding the environment in China quite congenial for business. But we may perhaps be wrong in holding a view that Indian manufacturers of automobile product and auto components still have an edge over their Chinese counterparts. We need not be afraid of Chinese competition.
Each one of us should operate with much greater scales to service not only our fast growing indigenous market but also the huge export market. Our exports are going up by double-digit rate. However our market share in the world market is miniscule. There is scope for stepping up exports five fold in five years in both automobiles as well as auto components.
BRIGHT FUTURE
In our opinion, Indian OEMs like Tata, Mahindra, Bajaj, TVS etc can also play a leading and useful role in promoting Indian business in ASEAN region by setting up their own assembly plants to manufacture and market their quality products. This is already happening to some degree in the case of Bajaj Auto and Tata Motors.
India’s future as an emerging market is great. Our economy has registered an average growth of over eight percent for four consecutive years. This has never happened in the past. We have seen what we could achieve in respect of sub-compact cars by reducing excise duty from 24 percent to 16 percent. Similar reduction at realistic levels should be extended to all categories of vehicles.