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India Auto Expo: Driving an economy of extremes

By Harmeet Shah Singh, CNN
  • The Auto Expo 2010 also is a beachhead for automakers in the exploding Indian auto market
  • India is expected to record 6.7 percent growth during the 2009-09 fiscal year despite the global recession
  • Yet 77 percent of the nation's billion-plus population live on less than a half dollar a day

New Delhi, India (CNN) -- As Toyota's Etios and Honda's New Small Concept faced each other on revolving platforms, it's more than a razzle-dazzle display of rival auto firms unveiling new cars.

The Auto Expo 2010 also is a beachhead for automakers, bruised by a tumultuous financial year, to establish a presence in the exploding Indian auto market.

"India will play a pivotal role in Toyota's global expansion plans and the time has come for us to strategically accelerate our growth here," said Kazuo Okamoto, the company's vice-chairman.

Competitors agree. "India is a focus market for Honda and the world premier of the New Small Concept at the auto expo is a testimony to this fact," said M. Takedagawa, the chief of the company's Indian operations.

The South Asian nation has become an important stop for world automakers. As Asia's third-largest economy, India has recorded an average growth of 8.5 percent over the last five years, and is expected to record 6.7 percent growth during the 2009-10 fiscal year despite the global recession.

"We have succeeded in significantly raising the growth rate and sustaining the momentum of economy to levels that are historically unprecedented," Federal Finance Minister Pranab Mukherjee said in November.

Video: New Delhi auto show

While India has sidestepped the worst from the global crisis, the chronic poverty of the country belies its hotspot status with automakers. About 77 percent of the nation's billion-plus population lived on less than half-a-dollar a day, according to a report to the Indian Parliament.

The swanky vehicles lined up at the Delhi exhibition are aimed to be rolled out on India's crammed roads and crumbling infrastructure. According to the Society of Indian Automobile Manufacturers, the country produces more than a million cars a year, a figure that currently is growing at 11 percent a year.

And as more cars hit the streets, more Indians are moving to the city. Indian authorities estimate the urban population might double in the next 20 years. At present, about 70 percent of Indians live in rural communities.

The urban influx and growing ranks of automobiles has policymakers concerned. "As infrastructure struggles to keep pace with the demand, urban cha os is becoming a way of life," Indian prime minister Manmohan Singh said recently. "Our cities and towns are not an acceptable face of a rapidly modernizing and developing economy. This must clearly change and change for the better."