India's Automotive Manufacturing Policy-Economic Impact and Growth Opportunities

Incentive Scheme for Automotive Production to Generate $45.2 Billion in Indirect Output, Driving Manufacturing Growth Potential

This research service focuses on the economic impact of India's automotive manufacturing policy, particularly the automobiles and auto components production-linked incentive (PLI) scheme. Following the outbreak of the COVID-19 pandemic and the subsequent shocks to global supply chains, India launched 14 PLI schemes across various industries as a crucial policy initiative to drive manufacturing sector development and attract new manufacturing investments.

The automobile PLI scheme extends sales value-linked financial incentives to battery electric vehicles, hydrogen fuel cell automobiles, and auto components. This study undertakes an economic impact assessment to examine the effect of the automotive PLI scheme on the Indian market in terms of output, employment, wages, and spending. The framework of this economic impact relies on the Leontief input/output (I/O) model.

The automotive PLI scheme will generate output and jobs in the automotive industry with a multiplier effect across the Indian economy. For example, increased car production will drive higher demand for metals, batteries, and other raw materials and components, creating additional output and employment in allied industries. Hence, the final economic result considers direct, indirect, and induced impacts. This study also highlights the growth opportunities in India's manufacturing and automotive industry arising from a combination of supportive government policies, supply chain diversification trends, and the sustainability push.

Key Issues Addressed:

• What is the strategic imperative behind the fortification of India’s manufacturing sector?
• What ripple effects will the automotive PLI scheme generate across allied industries and the larger economy?
• What will be the 2026 direct output, gross value-add, and employment impact of the PLI scheme?
• How do the indirect and induced impacts of the automotive PLI scheme compare to the direct impact?
• What is the per second and year output of the automotive PLI scheme?
• What growth opportunities does India present as it seeks to build local automotive and supply chain manufacturing capabilities and drive sustainability?