India's Car Industry

One of the consequences of India's rapid economics growth is that its car industry is booming. The bbc have done quite an in-depth article about the new Tata Nano car here.

This are will sell for about £1,200 and is the world's cheapest car. The allure of the car is strong and when interviewed Indians who live in rural areas aspired to owning a car more than anything else. As car ownership increase so does congestion, pollution and other negative externalities.

But it is not only the domestic market which is in India's sights. India plans to be a major car producing nation and export hub for the world's fastest developing region : Asia. There is in-depth analysis here. As can be seen from the graph above, over the next 5 years, India plans to increase its exports to $25bn.

To achieve this ambitous, but realistic, aim India must attract foreign direct investment, which it is: Hyundai have just invested £250m in a second car plant, which will take their capacity to over a million cars a year.