Page 1 of 5
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 03
April 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 13
FDI in Indian Automobile Industry: A Perspective
Naib Singh
Assistant Professor, Deptt. of Commerce, Rajiv Gandhi Govt. College, Saha-(Haryana)
Abstract
Foreign direct investment is very
essential for the industrial development
of the any nation. India is a development
country. FDI can help us to avail the
benefit of latest technical know-how,
foreign entrepreneurship, skilled work- force, experience. Automobile sector of
India is progressing day by day at the
rapid rate. This industry manufactures
17.5 million vehicles every year on
average basis. This sector is assisting
the industrial development of the
country appreciably by producing all
types of vehicles like two wheelers and
other including passenger cars and
heavy duty vehicles. In 2014, total
inflows of foreign direct investment in
this industry figured to 1.3 US$ billions.
Karl Pearson’s Coefficient of Correlation
depicts that the relation of the year by
year inflows of foreign capital in the
direct way is not relative. The present
inflow of the foreign direct investment is
much less than it should be.
Government should take more
measures to promote FDI in the
automobile industry.
Key Words:
Foreign Direct Investment (FDI),
Automobile Industry, Karl Pearson’s
Coefficient of Correlation (r).
FDI
Foreign investment has a great
importance in the industrial economy of
any nation. Foreign direct investment is
the investment of capital by the foreign
investor into another country. The flow
of this capital goes directly in the
targeted sector. FDI is also termed as
overseas investment, portfolio
investment and rentier investment. The
multinational companies rather than
foreign Governments procure this type
of investment. The need of foreign direct
investment in India is very urgent due to
inadequate domestic capital. Foreign
capital improves payment capacity of
the country. This investment facilitates
modern technology, skilled work-force,
innovative techniques, knowledge and
experience to the domestic
entrepreneurship. This investment also
transfers the risk of domestic investor to
foreign investor. Thus FDI not only
increases employment and profits but
also assists the economic development
of the country.
Indian Automobile Industry
Automobile sector occupies very
important place in the industrial
economy having the seventh largest
market. This industry is growing very
fast rate as compared to many
developed countries of the world.
Deloitte has published the data the in
the year 2020 Indian automobile
industry will attain the position of third
largest market. The industry is
contributing to the gross domestic
product of the nation up to 22 percent.
This industry manufactures 17.5 million
vehicles every year on average basis.
This sector is assisting the industrial
Page 2 of 5
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 03
April 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 14
development of the country appreciably
by producing all types of vehicles like
two wheelers and other including
passenger cars and heavy duty
vehicles.
Problem Description
This study is based on the discussion of
impact of foreign direct investment in the
Indian automobile industry. An attempt
has been made to view the magnitude
of FDI in the sector. In the discussion,
the role of the foreign direct investment
has been considered. Efforts have been
made to highlight the outcomes of the
study with special reference to the
inflows of total year-wise FDI in the
industry.
Data Structure and Methodology
For this article secondary data have
been collected from various online and
other sources. The structure is based on
the general information related to the
problem. The study does not include
any case study. The observations are
based on secondary data which is the
main limitation of the results.
Methodology includes meaning of the
problem in the introductory part,
performance and FDI scenario in the
body text and discussion in the ending
part of the paper.
Technique and Interpretation
A year wise inflow of the FDI in the
industry has been considered for
discussion in the study. For finding out
the relationship of year by year inflows
of the investment the statistical measure
has been used by applying Karl
Pearson’s Coefficient of Correlation.
Relation of the investment is interpreted
by considering the scale i.e. r=±1.
Performance of the Industry
Indian automobile industry is has
achieved vast progress. Many Indian
companies have become world leader in
this business. Main Indian automobile
leaders are Tata Motors Limited,
Mahindra and Mahindra Limited, Maruti
Suzuki India Limited, Hero MotoCorp
Limited, Bajaj Auto Limited, Ashok
Leyland Limited, Sundaram Clayton
Limited, TVS Motor Company Limited,
Eicher Motors Limited and Force Motors
Limited. Maruti Suzuki India Limited has
attained the first position all over the
world by manufacturing one million
vehicles in 1994. Bajaj Auto Limited is
occupying the second position at the
world level in manufacturing of the two
wheelers. Figure 1 is depicting that
Indian automobile industrial sector has
achieved a considerable progress in
terms of domestic sale.
Figure1: Domestic Sale of Automobile Industry (Number of Vehicles)
Source: SIAM Statistics.
9724243 12295397
15481381 17361769 17793701 18421538
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Page 3 of 5
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 03
April 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 15
The sector sold 18421538 vehicles in
2013-14 as compared to 9724243
vehicles in 2008-09. In last six years this
data has achieved the growth rate of
about ninety percent. Indian automobile
business is strengthening the economy
to the highest degree by making such a
huge sale.
Foreign Direct Investment in the
Automobile Sector
Foreign direct investment is very urgent
to make the domestic industry
competitive with the developed and
advanced international industry.
Government allowed foreign direct
investment in the industry in 1991 first
time. In the year 2002, Government
increased the limit of FDI up to 100%
through automatic route in this industry.
Provision of the investment without
minimum capitalization norms was
made under the new policy. During the
period of 14 years from 2000 to 2014
total foreign direct inflows in the
automobile sector has touched the
figure of US$ 9.6 billion.
Figure 2: Foreign Direct Investment in Automobile Industry of India (in US$
billions)*
*Data include the year-wise period from April to February.
Source: IBEF Statistics.
For knowing the relationship of year to
year foreign direct investment Karl
Pearson’s Coefficient of Correlation
calculation has been used in Table 1 as
following:
Table1: Karl Pearson’s Coefficient of Correlation
X X-A=dx dx2 Y Y-A=dy dy2
dxdy
1 -3 9 1.2 0 0 0
2 -2 4 1.2=A 0 0 0
3 -1 1 1.3 .1 .01 -.1
4=A 0 0 0.9 -.3 .09 0
5 1 1 1.5 .3 .09 .3
6 2 4 1.3 .1 .01 .2
ƩX=21
N=6
Ʃdx=-3 Ʃdx2=19 ƩY=7.4
N=6
Ʃdy=.2 Ʃdy2=2 Ʃdxdy=0.4
1.2 1.2
1.3 0.9
1.5 1.3
2009 2010 2011 2012 2013 2014
