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India turns to FTA to realise dream of being a small-car hub

Times of India

India turns to FTA to realise dream of being a small-car hub

Byas Anand

1 Jan, 2007

NEW DELHI: India seems close to crossing another milestone on its journey towards becoming the world’s small car manufacturing hub.

Made-in-India small cars in this case, to be defined as powered by a heart smaller than 1300cc is soon expected to get an easier passage into Sri Lanka, under an expanded free trade agreement (FTA).

Negotiations are currently underway to expand the scope of the current free trade pact between India and Sri Lanka. "One of the proposals is to include small cars made in India in the FTA list.

If approved, this would mean that all Indian cars that have an under-1300cc engine could be exported to Sri Lanka at near zero duty," a source close to the development told ToI.

Inclusion in the FTA would make Indian small cars cost competitive in Sri Lanka. The decision would favour models like MUL’s Zen, Alto, WagonR, Swift and M800, Hyundai Santro and Getz, Tata Indica (1.2L), and GM’ Aveo U-Va.

This comes on the wheels of government move to cut excise duty on compact cars. A clutch of global car makers have since announced major investment plans to manufacture compact cars in India.

"The government had last year announced its intent to make India a small car manufacturing hub in this part of the world. This expanded FTA would be the next step in this direction," an industry source said.

Sri Lanka is one of the biggest export markets for Indian vehicle manufacturers. India’s auto industry had even hosted a special automotive exposition Indian vehicles both cars and bikes in Colombo in August 2006.

With the on-road vehicle population of over 2.2 million and per capita income of $4300, Sri Lanka is a goldmine of automobile business.

"Sri Lanka, with its demand for new vehicles growing by nearly 50% a year, is all set to emerge as a major market in South Asian region. FTA would provide auto companies an opportunity to ride this boom," said an industry insider.

 source: Times of India