Editorial

Economic gravity

By Nagaland Post | Publish Date: 9/14/2019 11:21:51 AM IST

 India’s growing automobile sector has been badly hit after sales of automobiles, including passenger cars, sliding to the lowest in the last 22 years with 31.57 per cent due to weak consumer demand. Passenger car sales in India last month dropped 30% year-on-year to 200,790 vehicles from 290,931 units during the same period a year earlier, showed data released on Tuesday by the Society of Indian Automobile Manufacturers (SIAM). It was the worst sales performance since a 35% decline in December 2000. This was the ninth consecutive decline in monthly passenger car sales, an indication of the dramatic drop in demand in the world's fourth-largest automobile market. What happens in India's auto market is of great interest to global carmakers as well. India has one of the fastest-growing auto markets in the world and McKinsey forecasts that India will overtake Japan to become the world's third-largest car market by 2021, behind only China and the US. The automobile industry contributes almost 49% to the manufacturing GDP and 13-14% to the GST [Goods and Services Tax] collections according to Society of Indian Automobile Manufacturers(SIAM). Despite the government's ambitious target, to increase the share of manufacturing in India's gross domestic product (GDP) to 25% by 2022, from about 16%, and create 100 million jobs in manufacturing, many manufacturing sectors appear to be facing a crisis. Figures released this week by the automotive industry showed that the branch suffered its worst sales performance in nearly 19 years in July.Maruti Suzuki cut its temporary workforce by 6% over the past six months . A slowdown in car sales also has a negative effect on a number of related businesses - from steelmakers to auto parts makers and car dealerships. According to Automotive Components Manufacturers Association of India (ACMA), the vehicle industry is witnessing “de-growth”, resulting in 100,000 job losses in the component sector over the last few months. ACMA warned that should this trend persist for another 3-4 months, it could lead to 1 million job losses. In response to the concerns expressed over decline in auto sales, union finance minister Nirmala Sitharaman diagnosed the cause of dip in auto sales to millennials(23 to 37 years) no longer buying cars as they preferred to take Ola and Uber for transportation. However, a report published by a news media’s probe team found out that not only was auto sales down but even cab aggregators like Ola and Uber were also experiencing sharp decline in growth over the past three years. After Sitharaman blamed millennials as the reason behind the crisis in the auto sector, her colleague Piyush Goyal made another gaffe while defending the government's $5 trillion-economy dream. In the light of economic slow down, Goyal told a Board meeting the even "Maths didn't help Einstein discover gravity". In fact the law of gravity was formulated by Sir Isaac Newton. Goyal was trying to answer the question of how projected GDP growth rates don't seem to align with the $5 trillion-dollar economy mission. Modi’s promise to turn India to become a $5 trillion economy has been just the reverse. On the ground, job losses and unemployment continue to haunt the government since Modi came to power in 2014. Over the past few weeks, Finance Minister Nirmala Sitharaman announced several measures to tackle economic slowdown. The moot point is whether these are knee jerk reactions or serious fix-it measures.

 

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