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Automobile industry slowdown
The automotive industry is one of the fastest-growing industries as well as an important driver of the manufacturing sector in India. The sector contributing 7% to India’s gross domestic product (GDP) in 2018. At present, the automotive industry has been facing a slowdown worldwide.
Automobile industry a leading indicator of economic growth.
Present status
The current sales of vehicles have been the lowest in the last 19 years.
This is mainly due to a drop in domestic demand.
There was a 26% dip in car sales in May 2019 versus last year
Nearly 8% fall in overall vehicle production.
In 2017–18, the sales of four-wheelers, which were growing at 14% are now down to 5%
The downfall in the automobile industry
Every segment of the auto industry, beginning from two-wheelers to passenger cars, light commercial vehicles and heavy commercial vehicles, and even tractors, has been hit.
Second, what was a natural, cyclical downturn has been amplified by extraordinary circumstances unleashed by reform measures by the government.
An unthinking approach to a critical policymaking area such as electric vehicles has only intensified and prolonged the slowdown.
Uncertainty over BS-VI norms: India has decided to go to BS-VI by next April-June, 2020.
Implications
it provided direct and indirect employment due to its forward and backward linkages with other sectors.
A slump in automotive sales due to the cascading effect which in turn affects sectors such as tyre, steel and steering manufacturers.
Way forward
The government should consider dropping GST rates for BS-IV vehicles to revive the automobile industry
Liquidity needs to be converted into aggressiveness or willingness to finance. The NBFCs need to be encouraged to provide finance to people for buying cars.
Need to reduce GST on entry-level cars and that on the two-wheelers.
Both Central and State government need to provide a boost to the economy.
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