Indian Economy News & Discussion - Nov 27 2017

[disha]

Putting this thoughts quickly and in passing (rushing between tasks)

Could April-May-June quarter slow down is seasonal? Also July-Aug-Sept quarter will be "slow".

With elections spending mopped up in April, will there not be a natural slow down in May/June?

How was the marriage season in May/June? If it was but there was not much gold/textile uptake then that could be because the black money is being taken out of the system.

[Suraj]

That's not quite true for the RBI

Isn't it though? What foreign liabilities do they have?

Three quarters of RBI's balance sheet comprises foreign currency holdings, a significant part of it with associated liabilities, both short and long tenor. Some of their reserves (the CGRA part) are aimed at exchange rate management with these in mind. As the manager of the world's premier reserve currency, the US Fed isn't compelled to hold foreign currency reserves - others hold the dollar.

In my view, the idea that govt. debt needs to be paid back by future generations is a major fallacy in economic thinking. Govt debt is very different from private debt. In fact it is nothing but money with some duration.

To an extent it is a case of right hand paying the left, but it's not free. A larger government debt held in the form of expanded central bank balance sheet means the government is compelled to pay interest on it, which shows up as a growing interest burden to GDP figure, as in this one or this projection. 'Taking money from future generations' sounds evocative, but there are real implications in the form of lower ability to invest.

Of course, the government can strike debt off by fiat, but that's not free either - it would lead to significant turmoil in the market, and the impact on sentiment would drive up yields, which in turn would push up the interest burden going forward.

So far as I know, expansion of a CB balance sheet does not need to be authorized, not in India or in any country I know of. In fact such expansions happen constantly without any govt. intervention as a part of regular CB ops.

I'm referring to more extraordinary moments or crises and not normal day to day expansion of the monetary base. That's typically always authorized because it amounts to an additional interest burden to be covered from tax and non tax receipts.

[Suraj]

Regarding Q1 GDP numbers, here's the official CSO report (PDF) for reference.

Comments:

* The sharp slowdown is almost entirely in one economic sector - manufacturing. See Statement 1. the real growth in manufacturing was just 0.6% in Q1 vs 12% in the same quarter a year ago. Agriculture is down from 5% to 2%, but it's a smaller part of GDP, but it tends to be cyclical and monsoon driven.

* There's hardly any negative impact on the GFCF front. It's down from 32.8% of GDP in Q1 a year ago, to 32.5% now. Sequentially (using Statement 7 of Q4 2018-19 CSO report, it is up from 30.8% in Q4 of prior fiscal year to 32.5% at the start of current fiscal year now.

Therefore, my initial view of this data is that the economic issues are specific to one economic sector, and that several others, even related (e.g. construction) or upstream (core sectors) aren't anywhere as impacted, and have either held steady or even done better in YoY terms. I'd hope the government focuses on the revival of the manufacturing sector. It's shown a sequential slowdown for 4 quarters now, and it's almost down to 0% growth.

[Supratik]

Manufacturing PMI looks OK. Maybe problem in MSME. Other problem could be in consumption. Need to cut corporate tax and change IT slab as has been suggested by DTC committee.

[M_Joshi]

With Jaitley becoming sick in the first half, elections and Nirmala Sitharaman being a greenhorn in finance the govt lost focus on the ball. You can't depend on babus to run the show.

Fact : Slowdown is happening & it is cascading across sectors & not just limited to manufacturing.
Fact : It is not recession or depression like many whatsapp forwards.
Fact : Sentiment on the ground vis a vis the Govt is very negative. Doesn't matrer if the slowdown is real or not, the sentiment is what drives decisions. And the sentiment is of doom & gloom. I run a manufacturing business & talk to B2B vendors & clients & every one is echoing the same sentiment. Today's GDP nos. have given validation to those sentiments. Nobody is going out of business but slowdown in orders is being felt.

Culprits :
> New FM. She was taken on the garden path by the babus & was rolled down the ditch. Excessive taxation sources for puny net gains? CSR faaltugiri as criminal offence? Where is the major infra push? Where are tax cuts to boost MSMEs which will help cut China's outflowing manufacturing into India? This FM & babus in North block have no idea of the historical opportunity they are sitting on. People were ready after Modi 2.0 for the cylinders to be fired like GSLV but her Budget speech sounded like a phuuss Diwali rocket. 0.5/5 flop show.
> RBI. Sitting on such huge reserves in a cash strapped govt & growth hungry economy like India is a criminal level offence. Govt should've taken 6L crores & spent on new infra. What are the contingencies if this slow growth & killing of jobs is not a contigency for these PhDs? Plus those rates cuts after industry had cried their tears out were too little & too late. 0.6-0.75 rate cut is needed in one go to boost the sentiment on the ground.
> PM himself. There has been many policy announcements like swacch, startup, digital, smartcities, etc. But no aggressive policy on export promotion. No credible & growth oriented package to MSMEs except Mudra loans. No imposition of import duties on stuff that even small enterprises can manufacture in India.

I hope this 5% no is a wakeup call to those in Delhi riding their dream horses to $5 trln. China did it in 4 years. We can do it in 5 years but not based on our british era relic babudom systems. Things need to change to take India to 10% growth. All the previous 5 years I was waiting for 10% growth when it hovered around 7-8%. Now even 7-8% seems good.

Edit : Piyush Goyal would've been a better FM. Don't know what happened that he was not promoted to FM.

[A_Gupta]

Where is India on the various GST Laffer curves?
i.e., will cutting GST on some segment by a few percent be more than compensated revenue-wise from increased sales in that segment?

[A_Gupta]

The RBI annual report, available here:
https://www.rbi.org.in/Scripts/AnnualRe ... ?year=2019

Frauds Analysis VI.70 The number of cases of frauds reported by banks increased by 15 per cent in 2018-19 on a year-on-year basis (Table VI.1), with the amount involved rising by 73.8 per cent, though mostly related to occurrences in earlier years.

The average lag between the date of occurrence and its detection by banks was 22 months.

The average lag for large frauds, i.e.₹1 billion and above, amounting to ₹522 billion reported during 2018-19, was 55 months.

Among bank groups, PSBs, which constitute largest market share in bank lending, have accounted for the bulk of frauds reported in 2018-19. It was followed by private sector banks and foreign banks.

VI.71 In terms of area of operations, frauds related to advances constituted the preponderant share of the total amount involved in frauds in 2018-19, while the share of frauds in off-balance sheet items declined from a year ago (Table VI.2). In terms of the number of frauds too, those related to advances were predominant followed by card/internet related frauds and deposits related frauds. Frauds relating to card/internet and deposits constituted only 0.3 per cent of the total value of frauds in 2018-19.

Interesting that frauds from 4.5 years ago and more are still plaguing the banking system.

[Atmavik]

looks like our backs are against the wall and some of our best reform has come in such situation. its time to do something Big. i dont have any chaiwala info but i am hoping for the best and here is my reasoning.

After Modi 2.0 was sworn in, many including me were upset at the kind of people joining BJP especially in the rajya sabha( Andhra mallyas) but it resulted in abrogation of art 370. i am hoping for something similar in the economic policy as well. maybe it is time to get rid of some big public sector banks. if this cannot be done with Modi,Shah and Gadkari in the cabinet then i am not sure who else will ever be able to it.

[Rahulsidhu]

Isn't it though? What foreign liabilities do they have?

Three quarters of RBI's balance sheet comprises foreign currency holdings, a significant part of it with associated liabilities, both short and long tenor. Some of their reserves (the CGRA part) are aimed at exchange rate management with these in mind. As the manager of the world's premier reserve currency, the US Fed isn't compelled to hold foreign currency reserves - others hold the dollar.

The reserves are an asset, not sure why you mention them.
What are these "associated liabilities"? Who is the RBI borrowing from?

[Rahulsidhu]

Looking at reactions from policy makers in PMEAC and Finmin, the signs are not good.

1) The top excuse seems to be that global growth is slow, trade war is affecting us. I find this puzzling as China is the epicenter of global weakness, and it is affecting the countries that export to China - Germany, Korea etc. We hardly export anything into these markets. OTOH US which is our top market is doing just fine. If anything we should be seeing more FDI due to the trade war. Will post some data later on this.

2) There is some talk in the public and commentators on the need to cut rationalize govt expenditure. Chairman of the PMEAC also supported this view. Such a move will not only not help, but hurt the economy further. The govt is not a big household, don't manage its finances that way. This is pretty basic stuff in economics.

3) A lot of talk going around of privatization etc. By all means, use the crisis to push through such reforms. But recognize that the wasteful PSUs have always been there - they are not the cause of the slowdown.

4) The economic pain is seeping over into politics. Terms like saffron socialism are being thrown around. This slowdown has nothing to do with saffron or socialism. This is just bad macro management, and quite easy to fix. The thing we need to blame is neoclassical economics.

[Mollick.R]

X- post from Achievement Tracking - Modi 2.0 Govt Thread......

[Mollick.R]

Corporation Bank Officers’ Organisation unhappy over merger plan
A J Vinayak Mangaluru | Updated on August 31, 2019 Published on August 31, 2019

Opposing the decision of the Centre to merge Corporation Bank with Union Bank of India and Andhra Bank, the Corporation Bank Officers’ Organisation (CBOO) said the government has given a shock to them with the decision.

Read more: Govt banks on big bang mergers as GDP tanks

Satish Shetty, General Secretary of CBOO, told BusinessLine that the bank was doing well after the infusion of ₹9,086 crore capital recently. All the employees were enthused with the capital infusion and the recovery process. “We wanted to prove that we will come back. We had registered profit in the last quarter also. This decision is a shock the government is giving to us,” he said.

Also read: Corporation Bank Q1 net up 21.50 per cent

Mentioning that the government is not giving the bank an opportunity to prove itself, he said the bank had come back with good performance after facing difficulties in the 1990s. Stating that CBOO was infusing strength and energy to its members to show their efficiency to the world, he said all its efforts have gone in vain.

Shetty hoped that the stakeholders of the bank from the coastal Karnataka will support the unions in opposing the merger of the bank with others. Asked about the future course of action of CBOO, he said the office-bearers will meet soon to chalk out future strategy.

‘Privatisation move’
GV Manimaran, General Secretary of All India Nationalised Banks Officers’ Federation, told BusinessLine that the PSB mergers are on the lines of the suggestion made by former RBI Governor Raghuram Rajan in the report of the Committee on Financial Sector Reforms - A Hundred Small Steps – that was submitted to the Planning Commission. He said Rajan had suggested the merger among PSBs before privatising them in that report.

Manimaran said the recent mergers involving State Bank of India and Bank of Baroda have not yielded any visible results so far. He cautioned that the presence of private sector banks as payment banks and small banks will be throwing big challenge to the PSBs even after the merger.

Published on August 31, 2019


https://www.thehindubusinessline.com/mo ... 307253.ece

[Rahulsidhu]

https://swarajyamag.com/economy/structu ... l-cyclical

Make no mistake, what we have is a classic demand crisis and fiscal and monetary hawks will do us no favour if they continue to tread on the same path and keep prescribing their rigid norms.

In fact, it may well be the case that it is their rigidity that may have led us to the current situation.

Before getting into policy prescription mode, one must appreciate the gravity of the current economic slowdown. The fact that global economy is simultaneously slowing doesn’t help our case either.

However, our slowdown has more to do with domestic factors rather than external influences, at least for now. Therefore, revival of growth rates is possible, provided we fix these factors.

It is macroeconomics 101 that reforms, especially structural reforms have a positive impact on growth rate over the medium term while in the short run there are two tools — fiscal and monetary policy — that can be used to stimulate the economy.

Sorry if already posted, but this article gets a lot of things right. Kudos to the author.

[Supratik]

It seems Nripendra Mishra has stepped down. Don't know if it has anything to do with the economy.

[Mort Walker]

It seems Nripendra Mishra has stepped down. Don't know if it has anything to do with the economy.

I doubt it. Mishra is 74 years old and has worked with Modi since Gujarat. He is staying on for a couple of weeks more at the request of Modi. He may be appointed governor somewhere.

Nripendra Misra quits PMO, PK Mishra likely to be Modi's new Principal Secy

[Mort Walker]

TV reports indicate PSU bank employees may protest and strike due to consolidation. They claim that India being so large, that bank lending to poor farmers will suffer due to consolidation.

[kvraghav]

Why is real estate not going down inspite of slow down? The demand crisis is simply because we don't care about quality of life but invest on property. Whatever tax slab changes will save money, people will simply buy more property with saved money as emi. This real estate speculation should stop. Second empty plot should be taxed heavily

[chola]

Looking at reactions from policy makers in PMEAC and Finmin, the signs are not good.

1) The top excuse seems to be that global growth is slow, trade war is affecting us. I find this puzzling as China is the epicenter of global weakness, and it is affecting the countries that export to China - Germany, Korea etc. We hardly export anything into these markets. OTOH US which is our top market is doing just fine. If anything we should be seeing more FDI due to the trade war. Will post some data later on this.

One problem is we are not benefiting from the FDI being driven out of Cheen by the trade war. The big winners are Vietnam, Thailand and the rest of ASEAN.

But the bigger problem is we are an emerging market and EMs get clobbered whenever there are global uncertainties like trade wars. Not only is phoren hot money leaving SENSEX but long term FDI are delayed or scaled back. This affects the mood of desi companies too and their forward planning is also curtailed.

[Suraj]

Three quarters of RBI's balance sheet comprises foreign currency holdings, a significant part of it with associated liabilities, both short and long tenor. Some of their reserves (the CGRA part) are aimed at exchange rate management with these in mind. As the manager of the world's premier reserve currency, the US Fed isn't compelled to hold foreign currency reserves - others hold the dollar.

The reserves are an asset, not sure why you mention them.
What are these "associated liabilities"? Who is the RBI borrowing from?

The component of reserves with repatriability are an asset and liability, unlike reserves from a current account surplus .

[Jay]

From my rudimentary underdstanding of economic theory, it seems that economic growth numbers usually reflect decisions that happened 2-3 quarters prior and even more. If that holds "reasonably accurate" then the 5% growth might not be the bottom. I am simply astounded that how we were able to run down the countries economy to let it grow by only 5%? When the two big dogs of the world are in a shooting match, how did we not formulate policies to take advantage of the ensuing melee? As a supporter of Modi, and as a anti-cogi to the core, this is very disheartening. From the surface, it looks like that there is a lot of initiative to take bold steps, but what's lacking is having the plan, and out in into action on the ground. Take for example the demonetization saga. Still to this day, I am not sure what we achieved with that move. It seems Modi sarkar lost its wits around the economy and tried to do too many things at once and ended up biting more than it can chew off. 2024 is still some time away and my fervent wish is for the economy to make a turnaround. Baad me gayi 10%, I will cheer if we get back to 7%-8% growth in 2 years time. I don't want to imagine congoons/sikulars coming back to power, nor do I want the despicable "Hindu rate of growth" economic times.

[disha]

There is some rona-dhona again going on about FDI.

I hope posters instead of doing a rona-dhona about FDI and how bad the dukh-onomy (portmanteau meaning sad-economy) is actually go and grab some data!

Here are links from google chacha:

https://www.business-standard.com/artic ... 428_1.html

India attracts highest-ever FDI inflow of $64.37-billion in FY19: Report

And here is some data charted by month: https://tradingeconomics.com/india/fore ... investment

Compare the data for Jan-Mar' 18 with Jan-Mar'19. And definitely compare the data from Apr-June'18 to Apr-June'19.

And look at it from trend line perspective (the same chart) on trend line gives some 80% y-o-y gain in FDI!

Or put it other way (doing thumb rule calc): Apr-Jun' 19 quarter attracted some 14-15 Billion USD, compared to 11 Billion USD in same quarter last year.

Also there is only so much of FDI one can take. It is like only so much of food an individual can take. That FDI needs to be processed efficiently as well.

[kiranA]

Regarding Q1 GDP numbers, here's the official CSO report (PDF) for reference.

Comments:

* The sharp slowdown is almost entirely in one economic sector - manufacturing. See Statement 1. the real growth in manufacturing was just 0.6% in Q1 vs 12% in the same quarter a year ago. Agriculture is down from 5% to 2%, but it's a smaller part of GDP, but it tends to be cyclical and monsoon driven.

* There's hardly any negative impact on the GFCF front. It's down from 32.8% of GDP in Q1 a year ago, to 32.5% now. Sequentially (using Statement 7 of Q4 2018-19 CSO report, it is up from 30.8% in Q4 of prior fiscal year to 32.5% at the start of current fiscal year now.

Therefore, my initial view of this data is that the economic issues are specific to one economic sector, and that several others, even related (e.g. construction) or upstream (core sectors) aren't anywhere as impacted, and have either held steady or even done better in YoY terms. I'd hope the government focuses on the revival of the manufacturing sector. It's shown a sequential slowdown for 4 quarters now, and it's almost down to 0% growth.

I did some interesting analysis based on both the links above.

2018-19 Q4 gdp based on constant prices : 37.19 lac crores
2019-20 Q1 gdp based on constant prices : 35.85 lac crores

so quarter on quarter there is an actual decline of 3.6 percent. If there is another consecutive quarter on quarter decline then it is a recession as per US standards.

Second thing the GDP for year ending 2018-19 based on current prices is 190 lac crore. So I used current USD to INR of 71.74 to give me in GDP in current dollar terms of $2.648 trillion. Using current population of 1.339 billion gives me per capita current gdp which is around $1978. Still below $2000 or just barely around 2000 if you apply slight corrections around exchange rate or populations.

Third thing - I ran some numbers to see how many years it actually takes to achieve 5 trillion current rate nominal gdp that the govt set itself for. Now i assumed that GDP deflator (or overall inflation) is roughly equal to rupee depreciation against dollar. Though in reality in last 5 years rupee depreciated slightly higher so my estimate is likely to be favorable. But it is a good enough assumption - for eg. in latest quater RBI used 3% as difference between real and nominal growth rates (on a year on year basis)roughly equal to rupee depreciation against USD. So to move from 2.648 to 5 trillion nominal gdp at the current real gdp growth rate of 5 percent will take 13 years.

[Suraj]

That's not a major revelation as such, and has been mentioned here a long time ago (as far as 10 years back). Q1 GDP in absolute terms has pretty much always been much less than Q4 of the prior fiscal.

Economic activity is cyclical. Q3 and Q4 are much larger quarters in absolute terms than Q1 is:
* Q1 (Apr-Jun) is post harvest and pre monsoon planting season, and also after the end of Q4 and end of FY push
* Q2 (Jul-Sep) tends to show early impact of the monsoon and how the holiday season is shaping up
* Q3 (Oct-Dec) is the holiday season.
* Q4 (Jan-Mar) is the end of fiscal year push.

Therefore a percentage change in Q1 performance YoY has less bearing on overall GDP than changes in Q3/Q4 do.

[Cain Marko]

Subbu swami has been vindicated by the latest numbers it seems. The guy is an economist afterall.

[Cain Marko]

Enough of social services, govt already is spending good amount for that. If we are to become $5T economy in just 5 years, govt needs to spend on infra that will give impetus to economic growth. Not only that, provide incentive for desi manufacturing from phones to VLCC ships, by giving very low interest rate loans to pvt parties such as L&T shipbuilding as an example. They are also huge employment generators.

5T in 5 years. Pipe dream. They'll need an annual growth rate of close to 15%.

[tandav]

My observations and suggestions of economic activity.

1) the slowdown in consumption is actually a reflection of greater asset utilization. Eg instead of buying cars people are using OLA and Uber, instead of buying houses they are renting at 30% of EMI and I believe rentals and leasing across all segments is happening. For e.g. Why buy a washing machine when you can give clothes to a dhobi who may buy an industrial machine.

2) Land is a very badly utilized asset in India. I suggest that we reduce stamp duty from 5% to 0.5% and increase property tax from nearly 0 to 1%/year of circle rate. This should apply for all private land agricultural, residential, industrial and commercial land. Study the Chinese concept that there is no ownership of land and Govt allows only lease of land for which leaser has to pay rent. The problem with this approach is the likely possibility that no one will invest in making long term assets in the land and may overexpoit it to detriment of later leasers. For example say I lease agricultural land and convert to verdant forest which produces no revenue then after sometime my resources run out I will be evicted and someone else may come and clear my verdant forest for wood and make money in a way that I would not have done. Conversely we may have people that take a land on lease and badly damage it by some poisonous industrial process but make hefty profits and leave the place after the damage is irredeemable to go on another plot to do more of the same.

3) People are slowly moving from purchasing things to purchasing experiences. White goods Manufacturing at large scale may actually not be required in future. Fridge , washing machine may shift to shared spaces, However consumables like food will be required, however point of preparation and consumption may change. Cloud kitchens for e.g. What will probably remain consistent is food, clothes, entertainment, education

4) Health, fitness, wellness, environment and cleanliness will be a growth area people will demand and get better outcomes.

[Suraj]

Enough of social services, govt already is spending good amount for that. If we are to become $5T economy in just 5 years, govt needs to spend on infra that will give impetus to economic growth. Not only that, provide incentive for desi manufacturing from phones to VLCC ships, by giving very low interest rate loans to pvt parties such as L&T shipbuilding as an example. They are also huge employment generators.

5T in 5 years. Pipe dream. They'll need an annual growth rate of close to 15%.

It's not a pipe dream. It's pretty much in the mean of our long term nominal growth rate (economic survey, statistical appendex, table 1.2, col 2 data. From 2.9 trillion to 5 trillion in 5 years is a 72% increase in that period, or 12% CAGR.

It's an ambitious target given the economic headwinds sure. But people are getting tripped up by compound growth and they don't look at recent history. I'll stick to just this century. Our GDP today is ~$2.9 trillion. It only crossed $1 trillion back in 2007. At the turn of the century it was around $400 billion.

[isubodh]

2) Land is a very badly utilized asset in India. I suggest that we reduce stamp duty from 5% to 0.5% and increase property tax from nearly 0 to 1%/year of circle rate. This should apply for all private land agricultural, residential, industrial and commercial land.

Compliance is an issue there. Collecting Property tax has been too difficult in India. Collecting stamp duty is easy since buyer is already paying a big sum for cost of property and will to add that stamp duty to get his name as owner.
After demonetization when payment of old currency was allowed for property tax, I heard stories of people paying last five year Property tax dues in demo currency.

[SwamyG]

I visited Blr and Hyd in my recent trip. Try getting servants, plumbers, electricians, car drivers or cooks. Restaurants are overflowing, kirana stores selling things, departmental stores and malls crowded. All people celebrating festivals..

If we measure ourselves on numbers that West measures upon, them we will see doom and gloom.

[nandakumar]

Regarding Q1 GDP numbers, here's the official CSO report (PDF) for reference.

Comments:

* The sharp slowdown is almost entirely in one economic sector - manufacturing. See Statement 1. the real growth in manufacturing was just 0.6% in Q1 vs 12% in the same quarter a year ago. Agriculture is down from 5% to 2%, but it's a smaller part of GDP, but it tends to be cyclical and monsoon driven.

* There's hardly any negative impact on the GFCF front. It's down from 32.8% of GDP in Q1 a year ago, to 32.5% now. Sequentially (using Statement 7 of Q4 2018-19 CSO report, it is up from 30.8% in Q4 of prior fiscal year to 32.5% at the start of current fiscal year now.

Therefore, my initial view of this data is that the economic issues are specific to one economic sector, and that several others, even related (e.g. construction) or upstream (core sectors) aren't anywhere as impacted, and have either held steady or even done better in YoY terms. I'd hope the government focuses on the revival of the manufacturing sector. It's shown a sequential slowdown for 4 quarters now, and it's almost down to 0% growth.

I did some interesting analysis based on both the links above.

2018-19 Q4 gdp based on constant prices : 37.19 lac crores
2019-20 Q1 gdp based on constant prices : 35.85 lac crores

so quarter on quarter there is an actual decline of 3.6 percent. If there is another consecutive quarter on quarter decline then it is a recession as per US standards.

Second thing the GDP for year ending 2018-19 based on current prices is 190 lac crore. So I used current USD to INR of 71.74 to give me in GDP in current dollar terms of $2.648 trillion. Using current population of 1.339 billion gives me per capita current gdp which is around $1978. Still below $2000 or just barely around 2000 if you apply slight corrections around exchange rate or populations.

Third thing - I ran some numbers to see how many years it actually takes to achieve 5 trillion current rate nominal gdp that the govt set itself for. Now i assumed that GDP deflator (or overall inflation) is roughly equal to rupee depreciation against dollar. Though in reality in last 5 years rupee depreciated slightly higher so my estimate is likely to be favorable. But it is a good enough assumption - for eg. in latest quater RBI used 3% as difference between real and nominal growth rates (on a year on year basis)roughly equal to rupee depreciation against USD. So to move from 2.648 to 5 trillion nominal gdp at the current real gdp growth rate of 5 percent will take 13 years.

The American definition of two quarter decline GDP to denote a recession is measured seasonally and not sequentially. In other for India to slip into recession not only GDP Q1 fiscal 2019-20 must be lower than Q1 of fiscal 2018-19 but also Q2 2019-20 must be lower than same period last year.

[Nihat]

The swarajya article made a fantastic point about the government making large scale structural reforms in a non accomodative and fiscally tight policy environment. This may well have played the role of a demand suppressant and will continue to do so for the next year or so.

Immidiate relief in the form of IT tax slab changes, rate cuts, corporate tax Cuts and Gst rate reductions may help. The government will also need to go easy on tax compliance for a while and give tax relief to major sectors, while subsidizing experts. Though I'm unsure if the current FM is the right person to do that.

[vijayk]

[jpremnath]

I visited Blr and Hyd in my recent trip. Try getting servants, plumbers, electricians, car drivers or cooks. Restaurants are overflowing, kirana stores selling things, departmental stores and malls crowded. All people celebrating festivals..

If we measure ourselves on numbers that West measures upon, them we will see doom and gloom.

Thats not the right sample. These two are the fastest growing cities in India right now. Especially Hyderabad which has turned out to be a darling for large scale investments of late.

[ldev]

Car sales have crashed through the floor. What is happening? 10th consecutive monthly decline.....Modiji's national security team is A class, his economic team not so much.....

[yensoy]

^^^^ Merger is needed

Jokes apart, I think the biggest item crying out for attention from the government at a national level is the decongestion of cities by way of construction of new city extensions, with well planned roads, drainage, education/medical facilities, work/industrial and residential/cultural areas. Even one such project will provide a huge impetus to the economy, and there will be takers for it both homebuyers as well as industries/companies looking to expand.

Our consumption and lifestyle is highly constrained by our urban living space and limits how many cars or air conditioners can be sold, and we have to suffer the effects of poor planning causing issues with flooding, garbage, pest infestation and pollution.

[tandav]

Car sales have crashed through the floor. What is happening? 10th consecutive monthly decline.....Modiji's national security team is A class, his economic team not so much.....

Simply does not make economic sense to buy a car in India, those who bought them find it very difficult to find parking at locations of interest. Car ownership in most India cities has been constrained by lack of roads... everywhere you go you will find these expensive assets clogging up street space. To an average household they are better served by shared transport services such as Auto/E-Rickshaw, Metro, Ola/Uber, Motorcycles. Average trip time in cars are longer than motorcycles for same commute.

The 4 wheeler market in my perception has saturated... Air Conditioned Motorcycles type coveyance will have more traction and must occupy 1/3rd the space of a car or less on the road and in parking spaces.

[Aditya_V]

I think it is factor of few things, some economic slowdown, Good moonsoon means people who are having the money are investing in agriculture, new car safety norms even for existing inventory from Oct-19. Nobody wants to be caught with old stock which would not be registered. People wanting to replace cars after April 19 BS VI vehicles. and NFBC past crises coming out in the open like IL & FS.

[Supratik]

Regarding that Pai article I am not sure if Sitharaman understands economy and finance and is suitable for the job. That should have caught the eye very fast.

[darshhan]

Car sales have crashed through the floor. What is happening? 10th consecutive monthly decline.....Modiji's national security team is A class, his economic team not so much.....

Simply does not make economic sense to buy a car in India, those who bought them find it very difficult to find parking at locations of interest. Car ownership in most India cities has been constrained by lack of roads... everywhere you go you will find these expensive assets clogging up street space. To an average household they are better served by shared transport services such as Auto/E-Rickshaw, Metro, Ola/Uber, Motorcycles. Average trip time in cars are longer than motorcycles for same commute.

The 4 wheeler market in my perception has saturated... Air Conditioned Motorcycles type coveyance will have more traction and must occupy 1/3rd the space of a car or less on the road and in parking spaces.

Exactly. One of my cousins is a businessman has an annual turnover of Rs 4 Cr. His net profit would be atleast Rs 25-30 lakhs and I am taking conservative figures. He can easily buy a car but chooses not to as the town he resides in is simply unsuitable for four wheelers(narrow streets mainly). As per him he has no use of a permanent four wheeler. Whenever he requires one he just hires a taxi. I wonder how many people are like him. In metros such as Delhi and Mumbai four wheeler market is more or less saturated as Uber/Ola/Metrorail become omnipresent plus lifecycle maintenance costs are more than half the cost of vehicle itself plus finding parking spots is an ever increasing struggle. Oh and do not forget new driving tickets which have already kicked in. why take so much hassle?

One thing that experts and analysts have to understand about Indian automobile industry. We will buy a car(or anything) only if we are convinced of its usefulness. In US a driving your own car might be a rite of passage and many americans used to be obsessed about getting one's own car. Although even there younger generation is no longer that interested in owning a car. By and large most of the Indian people are not that crazy about a car. Unlike naive and starry eyed American kids, Indian people actually do the math and figure out that an investment in four wheelers will actually depreciate in value compared to say "investment in Land". This is something that should be internalized by the so called experts especially in the industry.

Now what can be done to revive auto industry. The main solutions lie with industry itself. i.e they should be investing more in Research and development including electric vehicles, self driving vehicles etc. This is something they have not done so far. Till this day I haven't heard of any exciting new electric or self driving vehicles being launched or in the process of being developed by Maruti or Tatas. Tells you how casually they were treating their customers. One thing the govt can do is to allow ATV type vehicles. They are much more safe compared to two wheelers and also smaller compared to sedans thereby causing lesser congestion. Another long term measure that government can take is to create atleast 20-30 new cities of 2 million capacity with adequate road network from begining. Then maybe in 10-15 years you will see a new market for automobiles maturing.

[Bart S]

One thing that experts and analysts have to understand about Indian automobile industry. We will buy a car(or anything) only if we are convinced of its usefulness. In US a driving your own car might be a rite of passage and many americans used to be obsessed about getting one's own car. Although even there younger generation is no longer that interested in owning a car. By and large most of the Indian people are not that crazy about a car. Unlike naive and starry eyed American kids, Indian people actually do the math and figure out that an investment in four wheelers will actually depreciate in value compared to say "investment in Land". This is something that should be internalized by the so called experts especially in the industry.

So you are saying that this exceptional wisdom was lacking for a couple of decades of rapid growth in car purchases, and suddenly dawned on people in the last 3-4 quarters?

There is a slowdown, plain and simple, continuing to live in denial just hurts our chances of fixing it. Sure there are many factors like ride sharing apps, BS6, GST etc that might be contributing to it, but nevertheless there is a major problem that needs addressing across the economy.