The global economy is in trouble owing primarily to the sharp slowdown in China which has taken its foot off the growth accelerator. Brazil and Russia, which were riding on the huge Chinese appetite for metals and natural resources, are experiencing sharp downturns in the absence of that link.

The developed world is also slowing down with only the US offering some hope. Amidst this, India has been projected as the fastest growing economy owing to its strong fundamentals of a large domestic market, a young and growing populace and a stable political regime showing the intent to make it a better place for business.

But even if the economy is growing at an impressive 7.3 per cent, the knock-on effect is really not visible. When the new Government was formed, its biggest challenge was to turn around the flagging manufacturing sector and thus followed the ‘Make in India’ announcement.

Long way to go

After almost 16 months, one would have expected early signs of revival in domestic manufacturing along with some spurt in investments. However, we are yet to see any real signs despite positive steps like moving towards digitisation, simplification of procedures, single-window clearance etc.

Foreign direct investment has doubtless increased but unless domestic investment picks up, the huge gap will remain. Investment in manufacturing is not viable thanks to high logistics and capital costs, poor labour productivity, skill deficit and cascading taxation.

Domestic manufacturing is further discouraged by the spurt of cheaper imports and dumping thanks to the number of free trade agreements signed by India. It is now up to the Finance Minister to go beyond the usual practice of relegating the Budget to an annual accounting exercise. He must, instead, give a clear economic policy direction with predefined milestones and time targets.

As for the tyre industry, India remains a huge untapped auto market set to become the second largest after China over the next 15-20 years. Economic prosperity and rising incomes will lead to higher vehicle ownership and demand for auto ancillaries including tyres. It is, therefore, important for the Government to provide proper policies and incentivise domestic companies.

The most pressing concern for the tyre industry is duty inversion that has led to a huge proliferation of imports. This has undermined domestic businesses which have invested ₹23,000 crore in the recent past.

Given that local production of rubber is insufficient to meet growing demand, import dependence will remain. However, this should not be at the cost of hurting domestic business, especially when manufacturing is yet to fully turn around.

Yet, this is precisely what is happening especially as natural rubber is in the negative list of Indo-ASEAN FTA. Hence, this does not benefit our natural rubber imports while tyre imports from Thailand, Malaysia and Indonesia land here at preferential/concessional duties. Unless this is resolved, capacities will remain underutilised and viability questionable.

While the FM had addressed this issue in the last Budget and certain sectors benefited consequently, serious anomalies pertaining to the tyre industry still remain unresolved. The sector is suffering from an inverted duty structure on one hand and unabated dumping of Chinese tyres on the other.

Moreover, there is an urgent need to maintain the buoyancy in demand seen since the festival season especially when rural demand remains tepid.

The writer is CMD, JK Tyre & Industries, and VP, JK Organisation

Related Topics
comment COMMENT NOW