SLOW DOWN IN ECONOMY

India opened its doors in 1991 to the foreign investors and agreed to floating of the Indian currency (though started with partial to almost full now) and therefore, is not insulated from the shocks of downturn in the global economy.  It was the brilliance of the then governor of RBI, Dr.Y V Reddy which saw the country not getting sucked into the vortex of the currency meltdown.  However, subsequently there had been many stalwarts who had been at the helms of the central bank but with limited success in warding off the global threat to have a cascading effect on the Indian economy.  Recently the Indian economy is looking at a bleak future in the near and mid term.  Let us look at some of the aspects that might have contributed to the same.

I took retirement from the bank voluntarily some time in 2013.  I was already owning an apartment and a car. As I was relocating to a city in the state where I was born, brought up and educated, I was thinking of disposing of the car.  However, as providence would have it,  a friend of mine was relocating to the state where I was last and we just exchanged our cars so that the travails of re-registration, loss on account of re-sale of a car registered in a different state etc. were eliminated.  After some time, I thought of going in for a new car.  A friend of mine who is well versed in personal finance, was objecting to my investing in a new car.  His arguments were: I already own a car though a bit old and a used car; I don't need a car in my retirement days, though I still have; the radio taxi and taxi calling apps are getting popular in the city where I relocated; even if I spend about Rs. 500/- per day on the taxi-fare, it would still be lower than the per day cost of owning a car. There was another matter that was and continues to be valid to-date.  Apart from the financial angle, with the vehicle population increasing day by day, in almost all cities, the city roads are becoming a choke a block and finding a parking place is becoming next impossible.  Driving from home to the nearest department store at a distance of about 5 to 8 kilometers, one has to spend a little over three quarters of an hour behind the wheel.  With these sage advice, he tried his level best to desist me from owning a new vehicle but all in vain is another matter altogether.

Returning to the economic downturn, the automobile industry in India had been a big employer and had been seeing a steady growth in the past three to four decades.  There had been many new companies that have come to the country and have set shops and both the existing and the new companies have introduced newer models year after year. Today, the automobile market in India easily rivals any developed country in terms of choice, capacity in terms of cabin and engine, drive facility, automated climate control, safety features etc.  But a few companies have posted a slump in the sales which is an expected one as there had been a slew of offers from other newer entrants to the markets with seemingly better models, attractive designs, pricing etc. The existing companies to tweek their models to compete with the newer entrants into the market there will be and is a time lapse. 

The present day population finds owning a car is more a liability than a facility with lots of flexibility.  Parking spaces in cities become a premium and even driving on the roads with such reckless traffic jams, crowds etc., the increased time spent on driving,  is a night mare.  Almost all the bigger cities have gone in for introducing metro train network though many corners of the crowded cities are yet to be connected.  Still the option to reach the nearest station using a hired vehicle and travel the distance in the metro to reach the nearest station on the other end, using local hired transport to reach the destination is becoming the order of the day. Alternatively, the radio cabs, taxi calling apps like OLA, UBER etc. are making the ride from source to destination more relaxed and free to the user. The chairman of one of the most respected automobile manufacturer predicted as early as 2015 about the impending slow down and down turn in the automobile sector. If this is the situation of the passenger vehicle scenario, the commercial goods vehicle is in a different space altogether.

The journey from Delhi to Thiruvananthapuram or from Guvahati to Vadodara would normally entail crossing different states and the trucks used to take about ten to fifteen days to travel the distance.  Added to that at each state crossing the trucks had to wait for checking of its papers for payment of the state or central sales tax and other levies.  This entailed making the journey longer in terms of number of days and time spent on the roads by the trucks.  The turn-around-time of a single truck used to be a maximum one single up and down trip in a month depending on the distance that the truck has to cover. It used to extend to maximum of three trips in a month if the distance is shorter. With the introduction of GST, the trucks which were doing a maximum of three trips in a short distance to one trip in a longer journey have started making five or six trips in a short journey to two trips in a longer journey .  The truck operator has started reducing the number of his fleet keeping in mind the turn-around-time of his trucks.  In that scenario, the demand for new trucks has fallen drastically in the past two years and it got crystallised in the present fiscal. In the commercial vehicle segment also there are newer entrants with better vehicles, longer mileage, better amenities to the driver etc.  The older truck manufacturers, as in the PV segment, have to invest heavily to improve their trucks' performance.

Be that as it may, are the automobile sector, both PV and CV, and the index of the stock market the only indicators of the healthy economy? The investors, especially from foreign shores, became jittery, had pulled out their investments in the Indian bourses for many reasons including their apprehension on the new government's tax proposals.  Having realised the folly of their budgetary proposals which lead to bleeding of the bourses, the government had acted swiftly to remedy the situation with their alternate proposals and action plans. How all these plans and proposals are going to get translated into action and affect the economy in the short term to mid term is to be seen.  Until then the slow down in economy is real but not to the extent of panic as some of the me-too-economists in the internet predict.