Would Stimulus From The Modi Government Recharge The Economy?
Businessworld|August 17, 2019

The slowdown in the auto sector has its genesis in the NBFC crisis, and hence the financial sector needs urgent reforms. But longterm structural issues need to be addressed as well

Suman K. Jha

THE CURRENT AUTO SLUMP IN India is the worst in recent memory. The monthly automobile sales dipped 18.71 percent in July, the worst in the last 19 years. This dip was most pronounced in the passenger vehicles segment, with sales plummeting 31 percent to 2,00,000 units.

The last one heard of a similar slowdown was in December 2000. SIAM said vehicle sales across categories was down to 18.25 lakh units in July, “down from 22.45 lakh units a year ago”.

This has had a cascading effect — plants have been shut, and widespread job losses have been reported. A media outlet reported as many as 350,000 workers may have been laid off since April.

Hero MotoCorp, Mahindra & Mahindra, Tata Motors, Bosch, Sundaram Clayton, among others, have shut their facilities for some time due to the slow-down. The auto industry employs 35 million people directly and indirectly and accounts for about half of India’s manufacturing output.

Worldwide Slump

But then the auto sector has been on a downward spiral the world over. Whether it ’s the US, Germany, or China, auto sales are down. A report by Germany’s Center for Automotive Research (CAR) says that the world car market sales will dip by “more than 4 million” units in 2019.

According to CAR director Ferdinand Dudenhoeffer, the downturn is “worst since the financial crisis of 2008, could last for four years”, with the enforced introduction of electric vehicles being a contributing factor in Europe, apart from, of course, President Trump’s trade wars, and a drastic fall in China sales. Many German car majors have reported a drastic fall in China numbers.

This EV thread rings a bell here, too. In India, the government has enforced the BS-VI norms (by 2020), soon followed by the EV push. These disruptions have an economic cost, too. Of course, Prime Minister Modi said in a recent interview that ICE vehicles and electric vehicles can co-exist — something that has been welcomed by the industry, but EVs will come sooner than later.

“Of course, this is the worst slump in recent memory. This may last for a few months,” says R.C. Bhargava, Chairman, Maruti Suzuki India, speaking to BW Business world. “I won’t buy the alarmist view that the economy is collapsing. But we need to ensure that during periods of slowdown, we shouldn’t increase prices and burden the customers. Yet we find that many state governments have increased road tax. They miss the national picture,” adds Bhargava.

Bhargava may be optimistic, but there are tell-tale signs that have sent shockwaves through India Inc. Sample what Britannia MD Varun Berry has to say. “Even for a Rs 5 product, if the consumer is thinking twice before buying it, then there is some serious issue in the economy,” Berry has been quoted as saying. He tells BW Businessworld that market growth “has halved”.

It’s another matter that mainland India may still not be debating the slowdown that is here to stay. A survey commissioned by BW Businessworld, in association with Havish M Consulting, which spoke to 5,000 people across 12 centers in India, finds that 50 percent of the respondents don’t know yet that a slowdown is here.

The India Slowdown

Probably sensing this national challenge, West Bengal Finance Minister Amit Mitra recently called for “taking the economic slowdown center stage — something that would make the Union government accountable”.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BUSINESSWORLDView All

“All products will be upgraded to BS-VI technology”

HYUNDAI MOTOR India’s MD & CEO S. S. Kim shares with BW Businessworld’s Ashish Sinha and Siddharth Shankar the company’s India strategy in 2020 and beyond. Excerpts:

1 min read
Businessworld
23 November 2019

‘An effective leader is one who has a service attitude'

Swami Mukundananda went to IIT Delhi and IIM Calcutta, before he turned a seeker. In a chat with BW Businessworld Editor-in-chief Annurag Batra, the yoga and spiritual guru talks about his book, 7 Mindsets for Success, Happiness and Fulfilment, leadership, entrepreneurial challenges and, of course, inner peace

9 mins read
Businessworld
23 November 2019

WORKING TOWARDS SMARTER CITIES

Thought leaders and innovators of smart cities engage to explore better solutions

8 mins read
Businessworld
23 November 2019

Promoting Innovation, Creative Thinking

SAP LABS INDIA IS AT THE CENTER of today’s technology revolution, developing innovations that not only help its customers run at the best, but also improve the lives of people everywhere.

1 min read
Businessworld
23 November 2019

Winning the War for Talent

THE IT & IT-BPM INDUSTRY in India has over the years tried to pivot the image of being a cost-effective service provider to one of building cutting edge products.

4 mins read
Businessworld
23 November 2019

Fostering Work-life Balance

LAUNCHED IN 2011, Happiest Minds provides customer experience, business efficiency actionable insights through an integrated set of disruptive technologies: big data analytics, internet of things, mobility, cloud, security, unified communications, etc.

1 min read
Businessworld
23 November 2019

Best-in-class Talent Processes

INTUIT INDIA’S MISSION OF ‘POWERING prosperity around the world’ is an inspiration for organizations whose vision is technology and innovation.

1 min read
Businessworld
23 November 2019

40 UNDER 40 SUMMIT: FUTURE GAME CHANGERS

Entrepreneurs and industry discuss the changing needs of various industries and what works on the ground By Mrudul Sharma

5 mins read
Businessworld
23 November 2019

How Sony Is Re-Investing Itself In India

Is Sony India reaching for the moon when it re-positions itself solely as a premium market player in India, which is its fourth-largest market globally?

10 mins read
Businessworld
23 November 2019

Will Auto Gloom End In 2020?

A lot is riding on the early recovery of Indian automobile sector which is launching diverse models at catchy price points to fight declining sales By Ashish Sinha & Siddharth Shankar

9 mins read
Businessworld
23 November 2019
RELATED STORIES

America's Vanishing Trust Fund

Social Security hits its peak this year. To replenish, it may need to take out loans

10+ mins read
Bloomberg Businessweek
August 31, 2020

GERMAN LASER TECH COMPANY SAYS GOV'T BLOCKS EXPORTS TO CHINA

A German company that specializes in laser communication says it is pulling out of uncompleted deals in China after the German government barred it from delivering hardware to the country.

1 min read
Techlife News
Techlife News #458

The Worst Worst Case

The U.S. banking system could be on the cusp of calamity. This time, we might not be able to save it.

10+ mins read
The Atlantic
July - August 2020

Death and Taxes

The Trump tax cut failed to deliver for all but the very rich. And the gop thinks this is the perfect time for more.

10+ mins read
Mother Jones
July/August 2020

US Wholesale Prices Fall 0.6%, Biggest Decline In 5 Years

U.S. wholesale prices fell 0.6% in February, the biggest decline in five years, led by a sharp drop in energy costs.

1 min read
Techlife News
March 14, 2020

Coronavirus Infects The Global Economy

Information about the markets and your money.

2 mins read
Kiplinger's Personal Finance
April 2020

Open For Business

The resilient city of Santiago entices MICE planners and travelers.

3 mins read
Global Traveler
March 2020

The Trouble With Full Employment

Figuring out when the economy has reached maximum employment is no easy thing. Just ask the Fed

6 mins read
Bloomberg Businessweek
January 27 - February 03, 2020

Modi's Economic Mess

Growth is stagnating, and the people are protesting. What happened?

3 mins read
Bloomberg Businessweek
January 20, 2020

Ups And Downs

Interest rate adjustments reflect the economic outlook.

2 mins read
Global Traveler
December 2019