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Our Bureau

New Delhi , Feb. 25

LAUDING the automobile sector for a remarkable performance that saw the industry breaching the Rs 1,00,000-crore turnover mark in 2003-04, the Economic Survey said the growth was contrary to misconceptions that the industry catered only to the ``top-income-stratum of society.''

The Survey pointed out that sales incentives, introduction of new models/variants coupled with easy availability of low-cost finance has stimulated demand for vehicles. Further, the "progressive liberalisation of the norms for foreign investment and import of technology have benefited the automobile sector" with production likely to exceed 10 million in the next couple of years. Total production of vehicles has increased from 4.2 million in 1998-99 to 7.3 million in 2003-04.

According to the Survey, the auto sector has been perceived to cater to the high-income consumer, however, the fact that the fastest growth in volumes has come from commercial vehicles shows otherwise.

"Between 1998-99 and 2003-04, output of commercial vehicles has grown 2.8 times compared to the 2.2 times increase in passenger cars. Furthermore, two-wheeler output continues to dominate the volume statistics of the sector," the Survey said, adding that for every passenger car turned out by the sector in 2003-04, there were seven two-wheelers produced.

However, it cautioned against the growth impediments in terms of increase in the interest rate, impact of delayed monsoon on rural demand and increase in input costs such as steel and said containing costs and export focus would be critical for the performance of major players.

Overall, the Survey said that with investment exceeding Rs 50,000 crore, the turnover of the automobile industry exceeded Rs 59,518 crore in 2002-03. "Including turnover of the auto component sector, the automotive industry's turnover, which was above Rs 84,000 crore in 2002-03, is estimated to have exceeded Rs 1,00,000 crore in 2003-04."

The fast growing auto components sector came in for special praise in the Survey, calling it the "sunrise sector". ``The auto component sector has also posted significant growth of 20 per cent in 2003-04, to achieve a sales turnover of Rs 30,640 crore ($6.7 billion). Further, there is a potential for higher growth due to outsourcing activities by global automobile giants," the Survey added.

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