The Indian automotive industry which was at its nascent stage at the beginning of the 21st century has now become an industry that accounts for around 7% of the India’s Gross Domestic Product (GDP) and is one of the largest employers in the economy.
The Indian auto market has been witnessing cyclical ups and downs in the past due to policy changes relating to diesel automotive, high rates of interest, infrastructure bottlenecks etc. The industry is hugely capital incentive, needing significant working capital. To add to that, the industry is subject to high taxes on the finished goods in terms of multiple taxes such as Basic Excise Duty, Automobile Cess, NCCD, VAT etc. Further, issues such as restriction on inter-adjustment of credits between the above-mentioned taxes culminate into high cost of production, thereby inflating the end price of the automobiles as compared to international markets.