Tata Motors Limited is one of the Tata Group subsidiaries, and manufactures automotive from Maharashtra. Its headquarters is located in Mumbai, India. Its products include trucks, vans, passenger cars, coaches, military vehicles, and buses. It ranks eighteenth in the world as a manufacturing company for motor vehicles, the second in the world by volume as a bus manufacturer, and the fourth largest truck manufacturer. It has several auto assembly plants and auto manufacturing plants located in several cities and countries in the world, e.g. South Africa, India, and Argentina. Tata Motors has listings on the New York Stock Exchange, the India National Stock Exchange, and the Bombay Stock Exchange (Kazmi, 2008).
Tata Motors began its operations in 1954, and developed over the years. It is now among the top three passenger vehicles manufacturers in India. It also collaborates with other motor manufacturing companies to come up with the best and suitable market designs of vehicle. Some of its classic designs are the Tata Prima saloon car, the Range Rover Evoque from its partnership with Jaguar and Land Rover companies, the heavy truck known as Tata Prima. The Tata Marcopolo bus and the Tata Starbus are the models of buses also produced by Tata. Other models from this Company are the Tata TL and the Tata Ace. These are trucks from Tata Motors designed for transport and construction works.
Tata Motors operates in an oligopoly market structure. This is where there are a few leading players in the given market and they come together to set rules that govern that particular market’s operations. They block any attempts by new players to enter the market so that they maintain their supernormal profits that they make from their market shareholding. However, Tata Motors holds a huge market share (about 64%) of its domestic Indian market. Some of the other players in the industry are the Toyota Motors from Japan, the Mercedes Benz from Germany and the England’s Land Rover and Range Rover models. Tata also has global presence. This enabled the company to stay on top of competition over the years. It used its global presence to acquire foreign brands and thus boost its brand image further. It is a customer-driven industry, and a demand driven company, hence it takes care of its customer’s tastes and preferences (Khanna & Palepu, 2010).
The macroeconomic environment of India remains very challenging, particularly concerning inflation. Inflation pushes up the cost of production of goods and services, eventually leading to a rise in their cost in the market as manufacturers spend more on to consumers as a cost-sharing measure. The increase in products’ prices makes goods and services unaffordable to many consumers in the country, hence a high cost of living. India has a very large population of over one billion citizens. Most of these people are low-income earners and live below the poverty line. They live in very dilapidated houses because they lack essential commodities for their basic life. This makes many of them live from hand to mouth, i.e. spend everything they earn on food and other necessities such as clothing and shelter, and keep none for savings.
This creates a huge demand for jobs in India, thus the high rise in the rate of unemployment in the country, as the Indian economy cannot cope with the ever-increasing demand for jobs. Low income means that people do not have a lot of disposable income to spend on luxury items such as automobiles. This reduced greatly the sales of Tata Motors within its domestic market. However, India has a proper education and healthcare system. In fact, it ranks among the best in the world in healthcare provision with specialty in surgeries, transplants and chemotherapy. This means that Indians have access to both education from start up to university level for free, and quality healthcare services for free (Panagariya, 2008).
The fiscal policy in India is expansionary, as it aims at boosting the economic growth in the country and lowers the rate of unemployment. India has had an impressive growth in its economy with a record of 9% average growth over the last four years preceding 2008-09 financial years. This process of fiscal consolidation resulted in improvement of fiscal deficit. In 2002-03 financial years, it was 5.9% of GDP. This dropped to 2.7% of GDP in 2007-08 financial years. This process also propelled the philosophy of equitable growth in the social and infrastructure sectors. This was thanks to the high revenue buoyancy driven by efficient tax administration and improvement in tax compliance. However, three unprecedented crises that hit the world affected emerging economies including India. They paralyzed the petroleum sector and led to the rise in prices of petroleum products. This eventually led to the rise in prices of other commodities as most of them incorporate petroleum products in the process of their manufacturing, especially as a source of energy. This finally breaks down the financial systems as the goods and services in circulation in the market become unaffordable to the common consumer (Allaoua, 1996).
The Reserve Bank of India (RBI) is the central monetary authority in the country. Its main objective is to maintain the price stability in the economy through promoting economic developments with reasonable price stability. It also has other roles such as controlling the expansion of bank credit, with special attention to seasonal credit requirements without affecting the output. It also promotes fixed investments to increase the productivity by restraining non-essential fixed investment. It restricts inventories. This is because overfilling of products and stocks results in sickness of the unit due to outdated excess stock. The RBI restricts inventories to avoid overstocking and idle money in the organization. It also promotes exports and food procurement operations. It ensures desired distribution of credit by considering small borrowers and priority sectors. The equitable distribution of credit leads to socio-economic development in the country. This ensures that all sectors of the economy have access to financial services, and thus spur growth and development throughout the nation. It also enhances efficiency in the financial system and reduces rigidity in operations to provide considerable autonomy, hence competitiveness and diversification in the business environment. This maintains discipline and prudence in operations of the financial system (Ray, 2008).
The above fiscal and monetary policies adopted by the Indian government and the Reserve Bank of India are the best to promote and enhance manufacturing and assembly of automotive by Tata Motors Limited. The fiscal policy aims at boosting economic growth and increasing the level of employment in the country. This means many people are empowered to purchase Tata vehicles either for production or for luxury, what increases domestic market for the automobile giant. The monetary policy targets to maintain price stability through promotion of economic development. Stable prices for the products of Tata Motors enable customers to plan for them, and even take loans to finance their purchase since they are sure of expected liability over time. This enables the company to sell most of its products on credit, thereby increasing its annual sales volume. Economic development also ensures that the cost of operation for the company remains low thus; they can produce affordable automobiles for their designated consumers (Fernando, 2011).