Much euphoria will, and indeed should, greet the rollout of Tata’s Rs 1 lakh Nano. It will, after all, enable tens of millions of Indians to drive around on four wheels, thus fulfilling a major aspirational goal — that of owning a car — for many more people in India than ever before. But the significance of the Nano is not restricted to just consumer aspiration — because to put it simply a car is not just a car. And this particularly applies to cars which are manufactured on a very large scale.

The car industry has very strong linkages with other sectors of the economy. It forms important backward linkages with industries like auto components, steel, rubber and tyres which contribute important inputs in the manufacturing of a car. The industry also creates a number of forward linkages — think car dealerships, service centres, the market for auto loans and car finance. By itself and through these important linkages the auto industry, perhaps more than any other single industrial sector, has the biggest potential to contribute a substantial part of GDP, generate mass employment and develop important skills in innovation and engineering.

 It is hardly surprising then that the production of cars on a mass scale has historically been the first sign of an emerging industrial powerhouse. The rollout of Henry Ford’s Model T in the early twentieth century signalled the arrival of the US as a major industrial power poised to overtake the old economies of Europe, particularly Britain. Later, and though it was accompanied by horrible political and social collateral implications, the production of the Volkswagen heralded the rise of Germany as an industrial centre. After World War II, the Japanese began their competition for the premier industrial nation with the US following the growth of auto companies like Toyota and Honda. And among the late industrialisers from Asia, Korea — a country poorer than India in the 1950s — announced its arrival on the world stage in the 1980s with names like Hyundai, Kia and Daewoo. Now, most recently, in the late 1990s and 2000s, China has witnessed a rapid expansion of a mass automobile market.

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