Introduction The automotive industry

Introduction
The automotive industry, comprising automobiles and auto components, has witnessed a continuous evolution ever since the development of the first few prototypes
back in the late nineteenth century. The industry has today emerged as a dynamic one, accounting for approximately one in ten jobs in industrialized countries.
Even for developing countries, the automotive sector has emerged as a catalyst for growth opportunities, especially because of the vast linkages that the auto
industry has with other sectors.

The Indian automobile industry has grown at a fairly healthy pace, aided by robust economic activity and infrastructure development; growing middle class
population with disposable income and availability of easy consumer finance facilities. The industry manufactures almost all major transport vehicles such as cars, multi-utility vehicles, light commercial vehicles, buses, trucks, tractors, motorcycles, scooters, mopeds
and three-wheelers. India is currently the largest manufacturer of tractors, second largest manufacturer of two wheelers and buses, fifth largest heavy truck manufacturer, sixth largest car manufacturer and eighth largest commercial vehicle manufacturer in the world.

Challenges to the Indian Auto sector with reference to exports-
Inadequate All Industry rate (AIR) duty drawback and cumbersome documentation process for brand rate ; need for rupee trading with Latin American and African countries; neighbouring markets like Sri Lanka and Bangladesh not giving India
preferential treatment in vehicles trade despite not having vehicle manufacturing base
; need to set up an office of EXIM Bank of India in Latin America; need for improving
port infrastructure to handle current automobiles exports and meet future demand; and
need for dedicated auto desks and storage facilities at existing automobile exporting
ports viz. Mumbai, JNPT, Chennai & Ennore.

Automobile sector is a major part of engineering sector. As per the draft Automotive Mission Plan 2016-26, vehicle exports can increase to US$ 33.3 billion on the conservative side, and US$ 44 billion on the optimistic side by 2026. Unlike other
industries, where exports have suffered during recessionary years, automobile industry has always seen year-on-year growth in exports. However, some concerns related to the industry which need to be addressed to achieve the potential are the following.
• Duty Drawback Issue: The All Industry duty drawback rate for different automobiles
is in the range of 2 – 4.7 per cent while the brand rate is higher than this. In the
absence of adequate all industry rate (AIR) duty drawback, some companies
wanted to opt for brand rate, however the documentation process for brand rate
makes it very cumbersome for companies to avail brand rate with a large number
of clarifications asked. This needs to be addressed.
• Rupee trading with LAC and African countries: Recent slowdown in the
commodities and oil prices have led to dollar unavailability in key African and
Latin American markets hampering exports from India. To counter this challenge, China has entered into RMB agreement with Nigeria, and is planning more
such agreements with 30 other African countries. India also has an agreement
for exports in rupees with Iran. Similar arrangements could be thought of with
countries like Nigeria, Angola, Egypt, and Ethiopia in Africa; and with Columbia,
Peru and Chile in Latin America etc. with whom India has trade deficit.
• FTA/RTA issues:
? All vehicle manufacturing countries have found their biggest market in their
neighboring countries. In India, we have lost market in our neighboring
countries in the recent past even though the political ties have improved.
None of the neighbouring markets have a vehicle manufacturing base, apart
from Pakistan. Despite this, in the Indo-Sri Lanka and Indo Bangladesh
FTAs, these countries have not given India preferential treatment in vehicle
trade. This needs to be negotiated.
? FTAs/PTAs across the globe have changed the dynamics of trade. The
countries which get preferential treatment have been able to take advantage
and take away the market from those which are not given preferential
treatment. Indonesia has given some concessions for automobiles under
PTA. Industry studies have identified markets like Algeria, Egypt, Nigeria,
South Africa, Chile, Peru, Colombia, Philippines, Myanmar, Vietnam,
Australia and New Zealand where trade agreements could help India’s
automobile sector if negotiated. At present negotiations are going on with
Australia ; New Zealand. There is a need to examine the feasibility of FTAs
with these countries.
• Issues related to Line of Credit: Exim Bank of India has offices in 3 places in
Africa but none in LAC. The Washington office is managing the activities in LAC.
With growing trade of India with LAC, India is extending Lines of Credits to LAC.
In view of the above, setting up an office of EXIM Bank of India in Latin America
could be considered.

• Port infrastructure: This has to be improved not only to handle current automobile
exports but also considering future demand particularly in southern and western
parts of the country. There is also a need for dedicated auto desks and storage
facilities at existing automobile exporting ports viz. Mumbai, JNPT, Chennai ;
Ennore.

The government had imposed a minimum import price (MIP) on steel which has reduced the benefit of lower commodity prices for automobile companies. The
impact has been adverse especially for manufacturers of commercial vehicles including truck and tractors where steel constitutes a large chunk of raw material. Exports-focused automobile manufacturers have also been hurt as their export contracts are linked to international prices. The Government has been extending the validity of MIP as a measure to boost the sales of domestic steel manufacturers ever since it was introduced in February 2016. The MIP was valid till February 2017, afer which it has reportedly been discontinued.

Policy
Policy
The Indian auto policy has generally been in line with the prevailing industrial policy
framework. During the British regime, India had no auto industry to begin with and all the
automobiles were imported from the global auto manufacturers such as General Motors and Ford
Motors. In the 1940s, Hindustan Motors and Premier Motors were established by Indian
entrepreneurs, by importing know-how from General Motors and Fiat respectively. In the 1950s, a
few other companies such as Mahindra and Mahindra, Ashok Motors (with Technical Collaboration
with Leyland Motors) and Bajaj Auto entered the market for commercial vehicles and two-
wheelers. Most of them either imported auto-components or produced them in-house, till mid-
1950s, when India launched import substitution programme. This development, followed by the
L.K. Jha Committee’s recommendations in 1960 to develop an indigenous ancillaries sector,
resulted in the evolution of a separate auto-component sector. From being a highly protected
segment pre-1980s, the auto-component industry in India has gradually emerged as an important
industrial sector. Till 1991, the Phased Manufacturing Programme (PMP), under which domestic
OEMs had to increase the proportion of domestic inputs over a specific time period, had laid
foundation for the Indian auto-component sector. Over the years the sector became quite confident
to face competition from abroad. The Government of India has recognised the automotive industry
as key to sustaining economic growth in the country, and has, over the years, come out with a series
of policy initiatives to support growth in the industry. These range from providing excise duty,
concessions to tax incentives for investments in the sector, incentives for promoting R&D, and
measures for export promotion and reduction of import duties for components. Apart from central
government, several state governments also have focused on attracting investments in the auto
sector.
The reforms of 1991, followed by the entry of global OEMs and Tier-1 suppliers in India,
paved the way for expansion of range, technologies and number of auto-component manufacturers.
This led to a major transition in the Indian auto industry, wherein the vehicle manufacturers started
outsourcing most of their components from the autocomponent manufacturers. Ever since the
delicensing of passenger car segment in 1993, the Indian auto industry has grown bigger, with new
international players entering the market. Since 2000, there have been many significant policydevelopments such as removal of Quantitative Restrictions (QRs) on auto imports and permission
for 100 per cent FDI in the sector. Financial liberalisation enhanced credit availability to consumers
and this, in turn, led to a boost of auto loans in India, which has been a key driver of demand for
automobiles.
Auto policy, 2002, stresses on the need to provide direction to the growth and development
of the auto industry in India which finally led to reduction of duties in the auto-component sector to
a large extent and the automobile sector to some extent and extension of R&D incentives to the
auto sector. R&D thrust by the government can be inferred from the increased R&D budget
allocation for this sector. In 2005-06, a few major policy developments relevant for the auto sector
took place. Implementation of VAT has taken place in a few states. Euro III emission norms have
been introduced in 11 metro cities and at the same time, the Euro II norms have been
implementation in rest of the cities. These norms have been delayed for the diesel vehicles due to
the unavailability of fuel. Therefore, the government decided to implement these norms in phased
manners in selected northern states. As a result of this, automobile producers had to improve their
technology which in turn had an impact on the component sector too. Finance Bill 2006 reduced
excise duty of motor vehicles to 12.5 per cent against 15 per cent before and import duty of raw
materials to 5-7.5 per cent against 10 per cent before and has given a thrust to the development of
infrastructure, which is the key factor influencing auto industry, both as a driver of demand and as a
facilitator of enhancing competitivenessin manufacturing of auto products.
The accession to the UNWP (United Nations Working Party) 29 -1998 is another important
decision taken by the Indian Government in 2005-06. This agreement is a significant step towards
the global integration of the Indian auto industry. A great deal of progress has been made on
bilateral and regional trade agreements. Automobile industry is expected to get its due benefit when
these agreements will be operational with full throttle. In this context, we must note that few
components have been put in the Early Harvest Scheme (EHS) of India-Thailand FTA. India’s
exports to Thailand in gear boxes (one of the EHS products) have increased significantly in post
FTA situation. Import of other auto component in EHS such as pistons showed a slow rising trend.
However, opinion has been made by major stakeholders that Indian component manufacturers are
still not in a position to compete with their counter parts from East and South East Asia. As a result,
some auto-components (such as engines, etc) may remain in the negative list of India-ASEAN
FTA. The industry has identified 77 items to be put in the negative list for all the proposed bilateral
and regional agreements India is currently negotiating. Some items proposed for the negative list
include two-wheelers in the range of 75-250 cc engine capacity, petrol and diesel engines for all
vehicles and all commercial vehicles, etc. Strict rules of origin (RoO) have also been proposed. The industry is in favour of product-specific RoO with ASEAN countries for the auto sector as there is a high probability of products from Korea, Japan and China coming into India through the ASEAN region. The industry’s proposals have been supported by the ministry of heavy industries in the Auto Mission Plan released in end 20079
.
In India, safety standards in 1991, the first state emission norms came into force for petrol vehicles and in 1992 for diesel vehicles. From April 1995, fitting of catalytic converters in new petrol-driven passenger cars was mandated in the four metros and unleaded petrol was also introduced. From April 2000, unleaded petrol is available in the entire country. As for road safety, numerous awareness programmes are arranged all over the country, since 2000-10 is a safety decade.
In developed countries, lead was phased out from petrol over a period of more than 10
years, while in India this was achieved in just six years. The time gap between the introduction of norms in Europe and India is narrowing down gradually. Euro I was introduced in the EU in 1983,
while the same was introduced to India in 1996. Euro II was introduced in the EU in 1996-97.
Bharat Stage-II norms, which are the Indian counterparts of Euro II, have been introduced for
smaller passenger vehicles (Gross Vehicle Weight < 3.5 tonnes) in 2000, and for heavier vehicles
(Gross Vehicle Weight > 3.5 tonnes) from 2001 in National Capital Region of Delhi. For Mumbai,
Chennai and Kolkata, these standards were extended to different months in 2001. Later, these
norms were extended to the rest of the country in phases by 2005. However, for some categories of
vehicles such as two-wheelers and three-wheelers, new generation norms are yet to be announced.
Bharat Stage-III norms have been implemented in many Indian states in phases10.
In 2006, a Draft of Automotive Mission Plan Statement was released by the Ministry of
Heavy Industries, in consultation with industry.11. The Government of India has drawn up an ambitious Automotive Mission Plan 2016, with the following vision statement: “To emerge as the destination of choice in Asia for the design and manufacture of automobiles and automotive components. The output of India’s automotive industry will be US$ 145 billion, contributing to 10 percent of India’s GDP, and providing employment to 25 million persons additionally by 2016″.This document provides special emphasis on small cars, MUVs, two-wheelers and auto-components. Measures suggested include setting up of a National Auto Institute, upgrading infrastructure, cutting the duties of raw materials and fiscal incentives for R&D.
In August 2006, the Working Group on Automotive Industry in the Ministry of Heavy Industries has brought out a report for the Eleventh Five Year Plan. This document stresses on the need of speeding up the move towards VAT in the states. Labour regulations, paperwork involved in government-related transactions, internal trade barriers, infrastructure bottlenecks, raw materials, human capital, increasing interest rates and threats due to FTAs are, as mentioned in this document, barriers to competitiveness. This report notes that the effective levy is lower for a Counter-Vailing Duty (CVD) than excise duties locally, because of the fact that excise is made after including the post-manufacturing expenses in the price, while imported Completely Built Units (CBUs) have the advantage of being levied the CVD before post manufacturing expenses. In addition, the document recommends various other measures such as upgrading human resources, mandatory inspection and control and retirement of vehicles based on road-worthiness.
Financial Bill for 2007-08 has very few measures that affect the auto sector. Cut in import tariffs of commercial vehicles to 10 per cent is expected to induce further competition in the Indian commercial vehicles (CVs) sector. Since CVs are required in the development of infrastructure, duty reduction on CVs may give a boost to infrastructure. Increase in total tax burden is certain to occur now, because of the increase in education cess from 2 per cent to 3 per cent of total taxes.
Extension of R&D incentives for five more years, reduction of Central Sales Taxes (CST) and increased infrastructural expenditure are positive features of the budget, for auto sector.
The decline in tariff rates in auto-components is accompanied by a rapid growth of this sector, though many had feared that lower protection could harm this sector. However, they differ across segments. Its demand is partly driven by drop in prices owing to customs and excise cuts in autocomponents and excise cuts in automobiles, though there are other factors driving production such as rapid income growth and the resultant demand expansion. The table below provides the tariff phasing out schedule over the years. It is clear from the table that the tariff phasing out for the components is much higher than that of the automobiles. Currently the debate is centered around
the import tariff of vehicles which has not come down for sometime. Some experts feel the
rationalization of import duties, particularly on cars and motorcycles, should be undertaken in a
phased manner and only after ensuring that Indian automobile companies get a comparable access
to global markets. Hence, Indian automobile industry has come a long way from a protected regime
to a liberal environment. However, industry and government feel that it still requires some amount of protection for securing the stability. For which, strategic protections in the form of higher tariff in few segments, stricter RoO, etc are in place which will also get relaxed in a phased manner.
We are glad that the new Foreign Trade Policy2015-20 is pragmatic and progressive, it gives a clear direction to the nation’s export agenda. It also provides the much-needed framework to enhance export of goods and services as well as generate employment which is in line with ‘Make in India’ vision of Prime Minister Narendra Modi,” President ACMA, Ramesh Suri, said.

expressed satisfaction on the focus given to consolidation of various exports schemes and further simplification of procedures to help integrate India in the global value chain, improving ease of doing business index through online and e-governance interventions and reducing the transaction cost in international trade.

172 tariff-lines of auto components are benefitted under the new policy compared to the earlier 166. The incentives provided encourage local sourcing and manufacturing as they are based on the amount of value-addition.

ACMA lists the five key provision in the new Foreign Trade Policy 
1. Stable policy for five years with mid-term review.

2. Export incentives consolidated into two schemes – Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS). Duty credit scrips issued under MEIS and SEIS and the goods imported against these scrips are fully transferable which can be used to pay customs duty, excise duty and service tax.

3. Under the export promotion capital goods scheme (EPCG), export obligation reduced from 90 per cent to 75 per cent in case of capital goods sourced locally, this will promote domestic capital goods manufacturing industry.

4. Indian Manufacturers who are status holders will be allowed to self-certify to qualify for preferential treatment under the various Preferential Trade Agreement (PTA), Free Trade Agreement (FTA), Comprehensive Economic Cooperation Agreement (CECAs), Comprehensive Economic Partnership Agreement (CEPAs). This ‘Approved Exporter System’ will help exporters in getting fast access to international markets.

5. Basic Customs Duty paid in cash or through debit under Duty Credit Scrips can be taken back as Duty Drawback.

It was confirmed by the Indian government that it sought to impose retaliatory tariffs on US products including walnuts, apples, almonds, pulses and shrimp as a move against President Donald Trump’s decision to unilaterally hike import duties on steel and aluminium.

because of Trump’s trade war with Europe and other parts of the world, it may well have to shift production from the United States to factories in other countries where it has plants, such as Brazil, India, and Thailand. Europe ia the company’s second largest market where in it made a sale of 40,000 bikes in the last year but after the imposition of steel and aluminium tariffs, EU decided to slap 25% retaliatory tariffs on products including Harley Davidson bikes which compelled the company to shift was a natural consequence of a protectionist US trade policy.

The tariffs raise the incremental cost per bike exported and the cozt of which would be passed on to customers and dealers inadvertently damaging sales. Trump spoke against unbalanced and unfair trade, while giving assurances of finding a solution for the same. Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” it argued.

Harley-Davidson rode into India on a mango deal. India cleared Harley’s investment proposal in 2007 in exchange for the US lifting an 18-year ban on mango imports from India. The US had banned Indian mangoes due to health issues while India had not allowed Harley due to regulatory problems. Harley attracted total taxes and duties amounting to 104%. But the US soon started complaining about the high duties.

In his first joint address to the Congress, Trump hinted at a “country” that was slapping 100% import duty on Harley. He was referring to India, though the tariff that year was not 100% but 75%. This year in February, Trump again raked up the issue. He slammed India for charging a high 50% duty on Harleys as against 0% that America charged on Indian motorcycles. He threatened India with a “reciprocal” tax.

Even after India slashed customs on imported high-end motorcycles to 50 per cent in February, it could not please Trump. Referring to his recent conversation with Prime Minister Narendra Modi, he said the “fantastic man” informed him that India had reduced tariffs on imported motorcycles, but the US was “getting nothing”.

And here’s the truth about India exporting thousands of motorcycles to the US at zero import duties as Trump had claimed. In 2016-17, India exported 2,440 bikes to America, which includes 150 bikes above 500 cc engine capacity. Though in numbers it looks big, in terms of value, it turns out to be a meagre $5.98 million. Even though the units doubled from April to November last year — 4,480 units — there were just 80 bikes above 500 cc that were exported.

A contrasting number, on the other hand, shows why Trump was feeling anguished. Motorcycle import from the US to India, above 500 cc, had dipped from 1,820 units in 2016-17 to 790 units in April-November last year. In terms of value, fall is from $11.60 million to $5.96 million.

According to an ET report last August, Harley’s market share in India in the premium luxury segment dipped from 92.3% in FY13 to 56.4% in FY18 till June. While the Indian market for 500 cc and larger bikes grew more than fivefold between fiscal 2013 and 2015, the next two fiscal saw a cooling down of the segment. the threat of a “reciprocal” tax also lacks bite. Reason: India’s two-wheeler export to America is not even a percent of its total global exports.

India and Thailand are mutually important trading partners among the ASEAN countries. The two-way trade
between India and Thailand become very important when India entered into the Comprehensive Economic
Cooperation Agreement (CECA) with ASEAN .A bilateral Free Trade Agreement (FTA) between India and
Thailand came into effect on 9 October 2003. This was to be operated through an “Early Harvest Scheme” (EHS),
for which there are 84 products including fruits, vegetables, wheat, diamond and auto components identified over
which an accelerated duty reduction formula, given below, was to be applied:
By 31st March 2004: 50% reduction from existing rates.
By 31st March 2005: 75% reduction from existing rates.
By 31st March 2006: 100% reduction from existing rates.
Consequent to this FTA India’s exports of helical springs, pumps, ball bearings and lighting
Equipment to Thailand has declined sharply over the years. The exports from India to Thailand have been well over these
years, in gear boxes and parts of Spark-Ignition Internal Combustion Piston Engine (SIICPE). India’s imports from
Thailand have, however, increased in all these product categories over the years. India has a positive trade balance with
Thailand only in Gear Boxes. However, this has been so high that the total balance, added for all these product. categories, has grown over the years, from a negative Rs. 2 crore in 1999-00 to a positive Rs. 100 crore in 2005-06.
Hence This FTA has served well as an indicator that when India opens up trade with a country that is competitive in the auto industry, mutual gains are possible, since India is also competitive in certain segments such as in gear boxes, vis-à-vis Thailand. There would certainly be some sectors that might lose as a result of this, but the net gain could well be positive. However, a careful country-by-country study of sub-segments of auto Industries and policy/cost regimes is required to decide on any FTA in future.

On 6 October 1998, the EC requested consultations with India concerning certain measures affecting the automotive sector being applied by India. The EC stated that the measures include the documents entitled “Export and Import Policy, 1997-2002”, “ITC (HS Classification) Export and Import Policy 1997-2002” (“Classification”), and “Public Notice No. 60 (PN/97-02) of 12 December 1997, Export and Import Policy April 1997-March 2002”, and any other legislative or administrative provision implemented or consolidated by these policies, as well as MoUs signed by the Indian Government with certain manufacturers of automobiles. The EC contended that:
 under these measures, imports of complete automobiles and of certain parts and components were subject to a system of non-automatic import licenses. 
 in accordance with Public Notice No. 60, import licenses might be granted only to local joint venture manufacturers that had signed an MoU with the Indian Government, whereby they undertook, inter alia, to comply with certain local content and export balancing requirements. 
 The EC alleged violations of Articles III and XI of GATT 1994, and Article 2 of the TRIMs Agreement.

On 1 May 1999, the United States requested consultations (WT/DS175) with India in respect of certain Indian measures affecting trade and investment in the motor vehicle sector. The United States contended that the measures in question required manufacturing firms in the motor vehicle sector to:
achieve specified levels of local content; 
achieve a neutralization of foreign exchange by balancing the value of certain imports with the value of exports of cars and components over a stated period; and 
limit imports to a value based on the previous year’s exports.

According to the United States, these measures were enforceable under Indian law and rulings, and manufacturing firms in the motor vehicle sector must comply with these requirements in order to obtain Indian import licenses for certain motor vehicle parts and components. The United States considered that these measures violate the obligations of India under Articles III and XI of GATT 1994, and Article 2 of the TRIMS Agreement.

On 15 May 2000, the US requested the establishment of a panel. At its meeting on 19 June 2000, the DSB deferred the establishment of a Panel.

Panel and Appellate Body proceedings
Further to a second request to establish a panel by the US, the DSB established a panel at its meeting on 27 July 2000. The EC, Japan and Korea reserved their third-party rights.

On 12 October 2000, the EC also requested the establishment of a panel. At its meeting on 23 October 2000, the DSB deferred the establishment of a Panel. Further to a second request by the EC, the DSB established a panel at its meeting of 17 November 2000. Since a panel had already been established with a similar mandate in the framework of the case WT/DS175, the DSB decided to join the panel with the already established panel in that case pursuant to Article 9.1 of the DSU. Japan reserved its third-party rights. On 14 November 2000, the US requested the Director-General to determine the composition of the Panel. On 24 November 2000, the Panel was composed.

On 21 December 2001, the Panel circulated its report to the Members. The Panel concluded that:
 India had acted inconsistently with its obligations under Article III:4 of the GATT 1994 by imposing on automotive manufacturers an obligation to use a certain proportion of local parts and components in the manufacture of cars and automotive vehicles (“indigenization” condition); 
 India had acted inconsistently with its obligations under Article XI of the GATT 1994 by imposing on automotive manufacturers an obligation to balance any importation of certain kits and components with exports of equivalent value (“trade balancing” condition); and, 
 India had acted inconsistently with its obligations under Article III:4 of the GATT 1994 by imposing, in the context of the trade balancing condition, an obligation to offset the amount of any purchases of previously imported restricted kits and components on the Indian market, by exports of equivalent value.

The Panel recommended that the DSB requests India to bring its measures into conformity with its obligations under the WTO Agreements.

On 31 January 2002, India appealed the above Panel Report. In particular, India sought review of the following Panel’s conclusion on the grounds that they are in error and based upon erroneous findings on issues of law and related legal instruments:
 Articles 11 and 19.1 of the DSU required it to address the question of whether the measures found to be inconsistent with Articles III:4 and XI:1 of the GATT had been brought into conformity with the GATT as a result of measures taken by India during the course of the proceedings, and 
 the enforcement of the export obligations that automobile manufacturers incurred until 1 April 2001 under India’s former import licensing scheme is inconsistent with Articles III:4 and XI:1 of the GATT.

On 14 March 2002, India withdrew its appeal. Further to India’s withdrawal of its appeal, the Appellate Body issued a short Report outlining the procedural history of the case. At the DSB meeting on 5 April 2002, the US commended India’s decision to withdraw its appeal and shared some of India’s reservations with regard to Section VIII of the Panel Report. The EC considered that the Panel’s findings were justified. Despite its decision to withdraw its appeal as a result of the introduction of its new auto policy, India indicated that the findings contained in Section VIII were outside of the Panel’s terms of reference and were both factually and legally incorrect. India requested that the DSB adopt only a part of the Panel Report and consider the adoption of Section VIII only at its next meeting. The EC responded that the Reports should be adopted unconditionally by the parties, thus there was no justification for India’s request. The DSB proceeded with the adoption in full of the Appellate Body and Panel reports.

Implementation of adopted reports
On 2 May 2002, India informed the DSB that it would need a reasonable period of time to implement the recommendations and rulings of the DSB and that it was ready to enter into discussions with the EC and the US in this regard.

On 18 July 2002, the parties informed the DSB that they had mutually agreed that the reasonable period of time to implement the recommendations and rulings of the DSB, shall be five months, that is from 5 April 2002 to 5 September 2002.

On 6 November 2002, India informed the DSB that it had fully complied with the recommendations of the DSB in this dispute by issuing Public Notice No. 31 on 19 August 2002 terminating the trade balancing requirement. India also informed that earlier it had removed the indigenization requirement vide Public Notice No. 30 on 4 September 2001.

Conclusions
Given the large population and growing middle class, India has the potential to develop into a significant market for automobile manufacturers. With a large, English speaking, relatively low-cost labor pool, India could eventually serve as a major regional export hub throughout Asia, Africa, and Europe.