Impact of FDI on the Automobile Sector in India

As India dreams of becoming a financial super power and join the developed countries, it is worthwhile to introspect on one of the key ingredients of the dream: Foreign Direct Investment (FDI). FDI is a key driver for growth and development and thus its inflow is crucial for an economy. India ranks pretty high on the Global Investors confidence, however UNCTAD's report on FDI Performance index ranks the country at a modest echelon. This study tries to understand the reasons behind such modest FDI performance with respect to the Automobile sector of the Indian economy in the post liberalization period. The also the study suggests certain measures concerning government policies that would strengthen this performance index. Automobile sector is one of the key sectors of the economy as it has deep forward and backward linkages to several key segments and is capable of driving economic growth and development. With the help of primary and secondary data and various statistical tools, the study infers that FDI is surely an engine of growth but the share of FDI in the Automobile sector is limited and hence the GDP contribution from the concerned sector is also very meager. The Government should come up with policy reforms that increase the FDI volume in the Automobile sector which would have a direct bearing on GDP and export earnings. This in turn would improve the FDI performance index as a whole.