Symptom as cause: On automobile
industry woes (The Hindu)
Mains Paper 3: Economy
Prelims level: Automobile industry
Mains level: Declining sales in Automobile industry
- India’s automobile industry is experiencing a snowballing crisis of
demand that shows no signs of abating, leave alone reversing.
- Domestic sales across all vehicle categories slid 19% year-on-year in
July, as passenger vehicle despatches plunged 31% to register the segment’s
steepest fall in almost 19 years.
- And with the wheels having come off both two-wheeler deliveries and
commercial vehicle shipments, with the former contracting 17% and the latter
slumping 26%, the picture is one of widespread gloom.
- The straightforward interpretation of the data is that demand has dried
up in all corners and among all key consumer segments — urban, semi-urban
and rural and personal and institutional.
- Nine straight months of contraction in passenger vehicle sales has also
begun extracting a toll in terms of showroom closures and lay-offs at
dealerships, component suppliers and vehicle makers themselves.
- While the Federation of Automobile Dealers Associations recently warned
of more jobs being at risk, on top of about two lakh positions that have
already been shed, the Society of Indian Automobile Manufacturers admitted
that the industry had laid off at least about 15,000 contract workers in the
last three months.
- That the broader economy is experiencing a serious slowdown has been
evident for some time now and the latest data from the auto sector only
bears testament to it.
- And as the RBI acknowledged last week “private consumption, the mainstay
of aggregate demand” remains sluggish.
Non availability of credit
- While some of the factors currently bedevilling demand in the auto
sector are well established the liquidity crunch in the NBFC industry and
the resultant tightening of credit availability to finance vehicle
- An increase in up front insurance costs and the 28% GST charged on cars,
motorcycles and scooters the fact that manufacturers overestimated demand
when setting up capacity, especially of fossil-fuel powered vehicles, has
largely been overlooked.
- In 2012, the company decided to invest ₹1,700 crore in a new diesel
engine plant in Gurugram, capacity that it now needs to repurpose or idle.
- Simultaneously, the ride-share industry has mushroomed in recent years,
especially in urban areas where choked roads and lack of parking space have
incentivised rapid adoption of app-based commuting. The outlook too,
especially for the near term, looks far from hopeful.
- The RBI’s July round of its Consumer Confidence Survey, which reflected
a decline in consumer confidence in July, shows 63.8% of respondents expect
discretionary spending will stay the same or shrink one year ahead.
- In June 2018, the comparable reading was 37.3%.
- The onus now lies on the government to urgently formulate policy
interventions to address this sectoral crisis or risk wider contagion.
Q.1) With reference to Deep Ocean Mission, which of the following
statements is/are correct?
1. It is an initiative of the Ministry of Petroleum and Natural Gas.
2. It aims to extract the shale gas from the Indian Ocean basin.
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.1) What are the factors behind declining the sales in automobile industry?
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