Getting the priority sectors right post-lockdown – Economic Times

A recent FICCI survey made it amply clear that the Covid-19 pandemic has had a deep impact on Indian businesses which could lead to unprecedented collapse of the Indian economy. Only a substantive and urgent economic package by the Government could save a large section of the industry from permanent impairment, survey findings stated.

The survey has just brought to the fore what businesses, cutting across segments, have been realizing ever since the Corona outbreak led to shuttering of businesses and disruption of supply chains. A financial stimulus is, indeed, imperative in view of the huge financial impact on businesses especially to those like auto & tyre sectors who had been facing exceptional distress even before the arrival of the current pandemic. For instance, Tyre industry is poised to lose sales of nearly Rs 10000 crore due to lock-down till the end of April. There is huge blockage of funds by way of inventories of raw materials and in the form of finished goods. Many OEMs have asked for deferment of payments and realizations from the replacement market have dried out.

It is heartening to note the Governments resolve to fight back with full might. Honble Prime Minister has exhorted his cabinet that Government must work on war footing to mitigate the impact of Covid-19 and strategize for the emergent conditions. However, what is of greater significance is PMs advice to lessen the countrys dependence on other nations and give a sincere push to Make in India as a long-term strategy to immune the country from external trade shocks. He emphasized on boosting Indias manufacturing and exports to benefit from emerging world realties.

Certainly, it is all the more important now to identify champion sectors where the country has much better bet of attaining the ideals of Make in India. These sectors will include the ones which have significant employment potential, have proven credentials in domestic manufacturing and exports, enjoy wide acclaim for quality worldwide and have the capacity to ramp up and become global leaders.

On all these counts, Tyre Industry in India has withstood the test very well over the years. It is unfortunate that Indian Tyre Industry has remained one of the less celebrated success stories on manufacturing landscape of India. The industry has not been adequately acclaimed for sterling achievements in areas such as exports, research & development and innovation. It is time that industrys key contribution as wheels of nations economy gets adequately noticed.

For one, Tyre Industry is self-sufficient in India with indigenous capacities to manufacture practically all kinds of tyres from a moped tyre to mammoth off-the-road tyres. Not many countries in the world can boast of this capability.

Not only has the Tyre Industry worked for a self-reliant India ever since independence but has emerged as a major exporter with Indian manufactured tyres being exported to more than 100 countries in the world including the most discerning ones such as US and European countries. Exports of tyres from India are in the range of Rs 12,000 crore per annum (nearly 20% of the industry revenue).

Job creation potential of the Tyre Industry is huge in view of a rich value chain extending from rubber planters to tyre mechanics. Industry supports over one million Natural Rubber (NR) planters since as much as 75% of the NR produced in the country is consumed in tyre manufacturing. Another million or so are engaged in tyre manufacturing, tyre retreading and those employed at tyre dealerships and tyre repair services across the length and breadth of the country.

Indian Tyre Industry is increasingly converging with the world in terms of practices, product quality and research & development. Today India has some of the finest radial tyre manufacturing facilities in the world. International vehicle majors (OEMs) have been rolling out leading brands in India on Indian made tyres underscoring the quality edge. The Indian Tyre Industry is emerging as a force to reckon with in the global manufacturing ecosystem. As many as four Indian tyre companies find a pride of place among the top 30 tyre companies in the world.

At a time when private investments have been hard to come by, Tyre Industry in India has continued to invest handsomely in capacity creation and technology. Ongoing and recently completed investments are to the extent of Rs 51,000 crore which is unprecedented in the history of the industry.

There is little doubt that India is in the sweet spot as far as tyre manufacturing goes. Seasoned entrepreneurship, availability of skilled manpower, availability of NR plantations and products surpassing international quality benchmarks are all the ingredients to make India a hub for tyre manufacturing in the world.

Tyre Industry deserves to be a shining example of Indian manufacturing (much like IT or Pharma in the respective sectors) in view of advancements in technology, contribution to Auto and Transport sectors, job creation potential and growth projections.

Currently, several countries in the world are looking to reduce their dependence on China for political, economic and strategic reasons. US and Japan are openly looking for alternatives to China to source products that offer quality and price competitiveness. And therein lies the opportunity of casting the net wider for exports of tyres from India.

However, the Indian Tyre Industry can leverage this opportunity and replace China in several key markets only if production and exports are provided a policy push by the Government and bottlenecks are removed. China enjoys huge economies of scale as far as tyre manufacturing is concerned. For instance, China exports tyres worth $15 billion in a year which is nearly double the size of Indian Tyre Industry. Actually, China has provided large export incentives to its tyre companies since the manufacturing capacity in China is many times that of its domestic requirements. To insulate its companies from the vagaries of fluctuation in Natural Rubber prices and availability, China is maintaining large reserves of rubber as a state policy.

Corona outbreak can work to Indias advantage as the quality of tyres produced in India has received worldwide acclaim. India can leverage this opportunity if the production and exports of tyres is given a strong fillip. That requires support to the industry much in the same way that the Chinese Government has been providing to its tyre companies.

Indias economic engine needs a lot of help from the Government to restart after the lockdown. However, support to a champion sector like Tyre Industry which has already proven its credentials as employment and export revenue generator will pay dividends in multiples.

DISCLAIMER : Views expressed above are the author's own.

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Getting the priority sectors right post-lockdown - Economic Times