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From Import Substitution to Integration into Global Production Networks: The Case of the Indian Automobile Industry

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  • Prema-chandra Athukorala

    (Professor of Economics, Australian National University.)

  • C. Veeramani

    (Associate Professor, Indira Gandhi Institute of Development Research.)

Abstract

This paper examines the growth trajectory and the current state of the Indian automobile industry, paying attention to factors that underpinned its transition from import substitution to integration into global production networks. Market-conforming policies implemented by the government of India over the past 2 decades, which marked a clear departure from protectionist policies in the past, have been instrumental in transforming the Indian automobile industry in line with ongoing structural changes in the world automobile industry. India has emerged as a significant producer of compact cars within global automobile production networks. Compact cars exported from India have become competitive in the international market because of the economies of scale of producing for a large domestic market and product adaptation to suit domestic market conditions. Interestingly, there are no significant differences in prices of compact cars sold in domestic and foreign markets. This suggests that the hypothesis of “import protection as export promotion†does not hold for Indian automobile exports.

Suggested Citation

  • Prema-chandra Athukorala & C. Veeramani, 2019. "From Import Substitution to Integration into Global Production Networks: The Case of the Indian Automobile Industry," Asian Development Review, MIT Press, vol. 36(2), pages 72-99, September.
    • Handle: RePEc:tpr:adbadr:v:36:y:2019:i:2:p:72-99
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    References listed on IDEAS

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    1. Athukorala, Prema-chandra, 2014. "How India Fits into Global Production Sharing: Experience, Prospects, and Policy Options," India Policy Forum, National Council of Applied Economic Research, vol. 10(1), pages 57-116.
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    Cited by:

    1. Novaresio, Anna & Patrucco, Pier Paolo, 2023. "Innovation and trade in the automotive industry: evidence from European countries (1990-2018)," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202306, University of Turin.
    2. Prema‐chandra Athukorala, 2019. "Joining Global Production Networks: Experience and Prospects of India," Asian Economic Policy Review, Japan Center for Economic Research, vol. 14(1), pages 123-143, January.
    3. Sardesai, Saskia & Klingebiel, Katja, 2023. "Maintaining viability by rapid supply chain adaptation using a process capability index," Omega, Elsevier, vol. 115(C).
    4. Akshay Bhat & Rohit Prabhudesai, 2022. "From Side Props to Key Actors: The Evolution of Indian Origin Commercial Vehicle Firms from Periphery to Prominence," International Journal of Global Business and Competitiveness, Springer, vol. 17(1), pages 68-75, December.

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    More about this item

    Keywords

    automobile industry; foreign direct investment; global production networks; India;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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