The Modi government’s ambition of reaching a $5 trillion economy in the next five years can get derailed if states don’t realise their role in promoting manufacturing, Maruti Suzuki India chairman R.C. Bhargava said on Tuesday.

Addressing shareholders of the company at its annual general meeting, Bhargava said it is time for states to become partners in making manufacturing industry grow and recognise the importance of its role in the overall automobile industry. The automobile sector accounts for 49 per cent of India’s manufacturing gross domestic product (GDP).

“The automobile industry creates a lot of employment in states, but a slowdown or fall in sales conversely generates unemployment,” he said, adding the sector creates a lot of revenue for states and “all of this is affected when the industry falls”.

Elaborating on the significance of state governments’ role, he said they have “much more to do with the cost of operating an industry”.

“The taxation of the state governments is quite higher, petrol tax for example is much higher and the affordability of a car is very much determined by the state government,” he said.

Urging states to become partners in India’s growth story, Bhargava said, “Unless that contribution is made, it is very difficult for the country to achieve the 25 per cent contribution of manufacturing or to reach $5 trillion target that the Prime Minister has set.”

He further said, “Efforts of the central government can get derailed if some of the states don’t recognise the important role they have to play in making this happen.”

On layoffs

Bhargava said Maruti had laid off around 3,000 contract workers as the sector faces one of the worst slowdown in two decades.

Maruti has not renewed the contracts of around 3,000 of his contractual workers but has not downsized its workforce, Bhargava said. He, however, reassured the employees that it will not retrench any from the 16,050-strong permanent workforce in the near future.