Toyota earlier said high taxes push cars out of reach for many consumers.
The government and the Indian unit of Toyota Motors have both played down the auto giant's decision against expansion in the country due to the high tax regime. Union Minister Prakash Javadekar tweeted that Toyota will invest more than Rs 2,000 crore in the country over the next year. It was confirmed by Vikram Kirloskar, the vice-chairman of Toyota Kirloskar Motor, who said the company is "committed to the future of India".
"The news that Toyota Company will stop investing in India is incorrect. @vikramkirloskar has clarified that Toyota will invest more than Rs 2000 crore in next 12 months," read the tweet by the Union Minister, who is in charge of the heavy Industries portfolio.
In an interview on Tuesday, Shekar Viswanathan, vice chairman of Toyota Kirloskar Motor, Toyota's local unit, said high taxes in the country keeps cars outside the reach of a majority of consumers. This means that factories are sitting idle and jobs aren't created, he said.
"The message we are getting, after we have come here and invested money, is that we don't want you," Mr Viswanathan said. In the absence of any reforms, "we won't exit India, but we won't scale up," he added.
In a carefully-worded statement later in the evening, Toyota said it needs to protect the jobs it has created in the country and would prefer to work towards consolidating existing operations.
"Over our two decades of operations in India, we have worked tirelessly to build a strong competitive local supplier eco-system and develop strong capable human resources. Our first step is to ensure full capacity utilization of what we have created and this will take time," the statement read.
It also pointed to the high tax regime in the country, and said the auto industry "has been requesting the Government for support to sustain industry through a viable tax structure" in the aftermath of the post-coronavirus slowdown in economy.
"We recognize the strong proactive efforts being made by the Government to support various sectors of the economy and appreciate the fact that it is open to examine this issue despite the current challenging revenue situation," the statement read.
The auto industry has been stagnating even before the pandemic started due to the economic downturn. But a decision against expansion by a major auto-maker is likely to weigh down the government's efforts to seek business.
Over the last months, Prime Mnister Narendra Modi has been repeatedly flagging the Make in India initiative and seeking foreign investment, showcasing the government's efforts to offer investors a better business environment.
In a nod to the government efforts, the Toyota statement read, "Our recent partnership with Suzuki in India on sharing technology and best practices are also in support of the "Make in India" initiative and Indian Government's policy, and aim to enhance the competitiveness of both companies".