FTA with EU may hit auto sector

To impact 'Make in India' campaign

With interest in India-EU FTA being revived, the auto industry is concerned that any concessions in the sector on demands by the bloc would have far reaching consequences for it and have an impact on the Modi government's Make in India initiative.

The demand of the EU to reduce import duties on fully imported vehicles will not only impact employment in the sector but will also be unfair to automobile makers from Japan, Korea and the US which have made huge investments in India, industry insiders said.

When contacted, Society of Indian Automobile Manufacturers (SIAM) Deputy Director General Sugato Sen said: "We have been consistently talking about keeping 20 tariff lines out of all FTAs and the government of India has so far supported this position. SIAM hopes that the position will be maintained in the case of India-EU FTA too."

The 20 items concerning auto sector that are in the negative list of FTAs include 16 different types of vehicles, including two-wheeler, and four different types of engines.

According to auto industry experts, giving in to the demand of EU in the auto sector could result in lower inflow of foreign investments in the key manufacturing sector.

"One of the main reasons for having a high import tariff on imported vehicles is to encourage companies to manufacture in India and is not about protecting the domestic industry. Once that is reduced, why would they set up manufacturing base in India?" asked an industry insider, who requested anonymity.

"This will thus run contrary to the 'Make in India' initiative," he said.

Therefore, any such concession to the EU could have direct impact on the auto industry that accounts for 7 per cent of India's GDP and employs about 19 million people, both directly and indirectly, he added.