Tata Nano at manufacturing plant in Gujarat
Employees work inside the newly inaugurated plant for the Tata Nano car at Sanand.REUTERS/Amit Dave

Nearly 10 lakh people might lose jobs due to a slowdown over the past 11 months in India's auto industry, warned Auto Component Manufacturers of India (ACMA) on Wednesday, July 24.

"Considering the auto components industry grows on the back of the vehicle industry, a current 15-20% cut in vehicle production has led to a crisis-like situation in the auto components sector. If the trend continues, an estimated 10 lakh people could be laid off," said Ram Venkataramani, President, ACMA.

The job losses are happening in the major hubs, including Gurgaon-Manesar belt of Haryana, Pune, Jharkhand's Jamshedpur and some parts of Madhya Pradesh's Pithampur. The auto components industry currently employs about 50 lakh people and nearly 70 percent of them are on contract.

ACMA sought for immediate government intervention, such as stimulating demand by reducing the GST to a uniform 18 percent.

"The industry needs urgent government intervention. There is an immediate need to stimulate vehicle demand and also sustain it post BS-VI implementation, as vehicles will become significantly expensive thereafter," added Venkataramani.

High taxation hitting auto sector?

Around 70 percent of all automobile components are currently under the 18 percent GST slab, but around 30 percent remain in the 28 percent bracket. Apart from this, automobiles attract a peak GST rate of 28 percent with additional cess of 1-15 percent depending on the length, engine size and type.

Leading manufacturers have shut down double digit production due to the decline in vehicle sales. Growth in revenue from exports also slowed down to 17.1 percent, Rs 1,06,048 crore, last fiscal year compared to a growth of 23.9 percent, Rs 90,571 crore, in FY18. The automotive component industry exports 26 percent of its total production.

According to data released by the ACMA, growth in total turnover of the component manufacturers in India came down to just 14.5 percent, Rs 3,95,902 crore, in FY19. In FY18, the revenue of the sector grew by 18.3 percent, Rs 3,45,635 crore.