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Table 9.7 LANDED PRICES OF ‘POTENTIAL’INDIAN EXPORTS OF AUTOMOBILE
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| Table 9.7 LANDED PRICES OF ‘POTENTIAL’INDIAN EXPORTS OF AUTOMOBILE PRODUCTS TO PAKISTAN ANDDOMESTIC PRICES price fob. of exports from India ($) price cif of imports at border* ($) duty + sales tax paid price ($) price in Rs (Rs) (000) price of Local Vehicle (with sales tax) (Rs) (000) Tractor 8474 9321 9321 839 h.c. Buses AC and for more than 13 persons 41012 45113 62727 5652 5500 g Three wheeled vehicles 1447 1592 2493 224 175 h Car < 1000cc 4855 5340 9292 836 826 a 1000cc - < 1500cc 7001 7701 14293 1286 1419 b – 1571 c ≥ 1500cc 9337 10270 19061 1715 1908 d – 1882 d Goods Vehicles < 5 tons 4540 4994 9269 834 1 1106 e Motorcycles 75cc – 250cc 615 676 1295 117 114 f Source: Authors’ own calculations. a Diahatsu Cuore, b Honda City, c Toyota Corolla, d Honda Civic, e Honda CG, f Master Highland, g Hino, h Sazgar * 10% is the cost of insurance and freight ** The relative competitiveness of Indian products has been enhanced by the 14.2 percent devaluation of the Indian rupee as compared to 5.7 percent in the case of the Pakistani rupee since July 1, 2011. Therefore, on balance the industry appears to be more apprehensive about opening up trade in automotive products with India. It is, however, the case that almost half the sample sees the positive challenge of accessing a much bigger market, especially if the trade-related infrastructure improves between the two countries, trade is facilitated and India does not apply 90 some non-tariff barriers more intensively on Pakistani products. It is also reassuring that a large proportion of the sample sees prospects for joint ventures down the road, leading to greater intra-industry specialisation. It also needs to be stated that the analysis of trade complementarity focuses only on trade diversion, in which India performs better, but full liberalization of trade could also lead to some trade creation. Overtime, Pakistan maybe able to create a market, for example, for products like low horsepower (below cc) motorcycles which are very competitively priced in Pakistan and for various autoparts and accessories and light tractors. Also, the emergence of a large trade imbalance with India, generally or in the automotive sector, is not necessarily a bad outcome, if it means cheaper imports and a saving in the overall import bill. Also, importantly, there could be significant consumer welfare gains if cheaper Indian imports substitute for more expensive imports from existing sources. This could happen, for example, if autoparts from India of comparable quality are available as opposed to more expensive imports from countries like Japan or Thailand. This will lead to a decline in domestic costs of production. Further, in the presence of Indian imports, the high profits of many OEMs who currently operate in quasi-monopolistic markets, as discussed in Chapter 5, will come under pressure to reduce prices and bring profits down to more reasonable levels. If this happens, particularly in the case of buses and trucks, then this will benefit majority of the population. Download 0.77 Mb. Share with your friends:
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