Friday, May 15, 2020
By Carkhabri Team
Will the Package of 20 Lakh Crore Beneficial For Auto Component Industry?
The auto manufacturing industry is not stagnated to only the companies manufacturing the vehicles but also the companies that are involved in the production of the components used for manufacturing these vehicles, and therefore any impact on the auto industry directly affects the components manufacturing companies also. As an impact of the lockdown in the entire nation due to the coronavirus, it is for the first time in history that the auto industry has recorded zero sales during April throughout the country. However, the auto manufacturing companies have made an immediate payment to the dealers, the suppliers of the auto components were the ones who underwent a difficult situation due to the shutdown of the operational activities.
Recently, in his address to the nation, Honorable Prime-Minister Narendra Modi announced the packages of Rs. 20 lakh crore to Micro Small and Medium Enterprises to overcome the effects of the lockdown. The package announced by the Prime Minister is 10% of the country’s overall GDP and interestingly more than 80% of the auto manufacturers are the part of Micro Small and Medium Enterprises (MSMEs). This segment has very low cash in hand to operate their business and to pay salaries for the lockdown period to its employees. Earlier also the Auto Component Manufacturers Association (ACMA) had urged the government for announcing any financial assistance to the industry.
Commenting on the package announced by the prime minister, Mr. Deepak Jain, President, ACMA said, "Announcement of the ₹ 20 lakh crore economic package is indeed very welcome and is the need of the hour. This will bring much-needed relief to several stressed sectors and industries, especially the MSMEs. A significant proportion of the industries in the auto component sector are MSMEs. ACMA is committed to making the Hon'ble Prime Minister's Vision of self-reliance through localization, global competitiveness, vibrant local manufacturing, and a robust local supply chain a reality. Reforms in land, labor, liquidity, and laws are critical to make India a driver of the global economy."
The relief package is believed to not only boost the auto industry as a whole but also to the middle class and lower-middle-class segments which are expected to play a vital role in strengthening the chain of demand and supply. According to Mr. Rajan Wadhera, President, SIAM, "India has delivered in the fight against COVID 19 on the medical front. Now the promise of Rs 20 lakh Crore comprehensive economic package announced by the Hon'ble Prime Minister, focusing on Economic activities and an overall aim of a Self-reliant India, will provide the right boost to demand and growth of our economy once again. Indian Automotive industry is a strong pillar of Make in India with huge contributions to GDP and employment and relies on its highly indigenized supply chain. We are hopeful that a focused package to support the Indian Automotive Industry would be announced by the Hon'ble Finance Minister when she announces the details of the package"