Maruti Suzuki AGM: RC Bhargava Says States Need To Realise Their Role In Promoting Manufacturing In India

The Narendra Modi government's ambition to make India a five-trillion-dollar economy can get derailed if states do not realise their role in promoting manufacturing, said Maruti Suzuki India Ltd.’s Chairman RC Bhargava on Tuesday.

Addressing Maruti Suzuki’s shareholders at the company’s annual general meeting, Bhargava said it is now time for state governments to become partners in making the manufacturing industry grow and recognise the importance of its role in the overall automobile industry.

The auto sector accounts for 49 percent of India's manufacturing gross domestic product.

"The automobile industry creates a lot of employment in states, but a slowdown or fall in sales conversely generates unemployment," said Bhargave, adding that the sector creates a lot of revenue for states and "all of this is affected when the industry falls" .

Elaborating on the significance of state governments' role, the Maruti Suzuki chairman said they have "much more to do with the cost of operating an industry".

"The taxation of the state governments is quite higher. Petrol tax for example is much higher and the affordability of a car is very much determined by state governments,” said Bhargava. They have much to gain or lose from how the auto industry grows, he added.

Bhargave also urged states to become partners in India's growth story. "Unless that contribution is made, it is very difficult for the country to achieve the 25 percent contribution of manufacturing or to reach $5 trillion target that the PM has set."

"Efforts of the central government can get derailed if some of the states don't recognise the important role they have to play in making this happen."

He cited the example of the steps taken by the Centre last week to give an impetus to the economy, and the auto industry in particular.

"The finance minister has communicated with the banking system and now we are seeing the reversal of that. One of the favourable things that has happened is that the financing costs (of automobiles) are coming down. We are grateful to the Finance Minister for making that happen," Bhargava said.

The central government has rolled back the proposed increase in registration cost of vehicles, "but I think it is necessary to understand the growth of manufacturing. The growth of economy is not entirely the responsibility of the central government,” he said. "The states governments have at least as much of a role, I believe, a larger role than the central government in ensuring that manufacturing and industrial growth and wealth creation takes place."

The impression one gets is that only the central government is responsible for the industry to grow or take the auto industry out of the slowdown, the Maruti Suzuki chairman said.

He also cited the example of nine states where road taxes have been hiked, thereby resulting to increase in vehicle costs by as much as Rs 97,000. This has "affected the ability of customers" to buy new vehicles, leading to drop in sales, he said.

The dip in auto sales were more pronounced in these states, Bhargava said, citing a study conducted by Maruti Suzuki internally.