Would Stimulus From The Modi Government Recharge The Economy?

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.