India's Auto Component Sector Set for Major Expansion by 2030: NITI Aayog On the non-fiscal side, NITI Aayog advocates for the adoption of Industry 4.0 technologies, international collaboration, the simplification of regulatory processes, greater flexibility in worker hours, and enhanced mechanisms for supplier discovery.

According to a new report by NITI Aayog, India's auto component sector is on track for significant expansion by 2030, with plans to increase production from $70 billion in FY23 to $120 billion by FY30. The government think tank also projects a threefold increase in exports—from $20 billion to $60 billion—positioning India as a key player in the global auto supply chain.

In its report titled 'Automotive Industry: Powering India's Participation in Global Value Chains', NITI Aayog further estimates that domestic production will grow to $145 billion, driven by rising demand and a shift towards high-quality, value-added products.

"Achieving these targets will require addressing major challenges such as improving scale, cost competitiveness, R&D capabilities, and infrastructure. Strategic policy interventions, it said, will be essential to bolster industry growth and strengthen India's global competitiveness," the report notes.

"India's automotive manufacturing sector faces a disability of around 10 per cent compared to China as the country on account of higher raw material costs, steeper import duties, and increased freight costs. Moreover, India's depreciation rates are twice that of China, at 100 per cent versus 50 per cent, and the prime lending rate is substantially higher, with China's rate at 3.45 per cent compared to India's MCLR of 9.37 per cent. These cumulative disadvantages underscore the need for targeted support to enhance the competitiveness of India's automotive industry," the report read.

As per the report, India's automotive industry is the fourth-largest automobile producer globally, but its share in the global auto component trade remains at just 3 per cent, highlighting significant untapped potential. Despite achieving a near-neutral trade balance, the sector faces a cumulative cost disadvantage of nearly 10 per cent compared to competitors such as China. "Key structural challenges continue to hinder its global competitiveness, including supply chain inefficiencies, high input and equipment costs, and limited presence in high-precision areas like engine and transmission systems," the report read.

NITI Aayog's report details a range of strategic fiscal and non-fiscal interventions designed to boost India's global competitiveness in the automotive sector. The recommended measures are categorized across four segments of automotive components—Emerging & Complex, Conventional & Complex, Conventional & Simple, and Emerging & Simple—based on their manufacturing maturity and complexity.

Under fiscal measures, the report proposes support for operational expenditure (Opex), skill development initiatives, increased investment in R&D, intellectual property (IP) transfers, and the development of manufacturing clusters. On the non-fiscal side, NITI Aayog advocates for the adoption of Industry 4.0 technologies, international collaboration, the simplification of regulatory processes, greater flexibility in worker hours, and enhanced mechanisms for supplier discovery.