<div><em><strong>Sutanu Guru</strong> analyses how auto sales trends in 2015 signal a weak economic recovery</em></div><div> </div><div>There is a raging debate going on about the extent and quality of economic recovery in India. Supporters of Prime Minister Narendra Modi throw around many sets of data to claim a strong economic recovery is gathering momentum. Critics of Modi throw around another set of data to claim that claims about a turnaround in the Indian economy are; well, just tall claims. The funny thing is that both set of data are credible and it is up to you to draw your own conclusions. But is it then a classic case of some people looking at a half full glass while others stare at a half empty glass?</div><div> </div><div>Economists and pundits can go in arguing. But for those who are not into seriously jargon laced debates, the automobile industry provides a clear picture of the health of the Indian economy. Even economists who violently disagree on everything else under the sun agree that a smart recovery in automobile sales is the most telling and effective indicator of an overall economic recovery. Recent historical data from India confirms this. We all know how the Indian economy, like most economies of the world, almost tanked after the 2008 collapse. This was reflected in the automobile industry where hitherto rapidly growing numbers slid into negative territory. But 2009-10 saw the Indian economy stage a smart recovery. What happened with automobile sales in the same period? Sales of passenger vehicles in 2009-10 amounted to about 1.9 million units. In 2010-10, they zoomed up to more than 2.5 million units. Something similar happened with commercial vehicles. Sales jumped from about 5.3 lakh units in 2009-10 to more than 6.4 lakh units in 2010-11. In fact, sales of commercial vehicles jumped spectacularly in the next year to about 8.4 lakh units in 2011-12 while passenger vehicle sales registered a modest growth to more than 2.6 million units. That was when optimistic industry analysts started forecasting that the passenger vehicle sales number would cross 3.5 million units by 2015-16 while commercial vehicle sales would comfortably cross 1 million units.</div><div> </div><div>We all know what happened after that. Thanks partly to a weak recovery and mainly because of disastrous policies of the UPA government, growth rates started plummeting and the marquee GDP growth rate had collapsed to just about 5 per cent by the time the UPA was punished by the Indian voter in 2014. Between 2012 and 2014, there was not a single month in which passenger or commercial vehicle sales topped the record figures registered in early 2012. Look at it this way. In March 2012, passenger vehicle sales touched 3 lakh units. The best achieved in a single month since then was 2.3 lakh units. As the Indian economy went into a virtual tailspin, so did the sales of the Indian automobile industry.</div><div> </div><div>Has there been a turnaround since Modi assumed power? If you look at GDP numbers, yes since growth rate for the current financial year is estimated to cross 7 per cent. But automobile sales do not project a rosy picture of a sustained turnaround. Even if declining interest rates propel consumers to buy more cars, the best that the passenger vehicle sales can register in the current financial year is a tad more than 2.5 million units, still lower than the sales registered in 2011-12. The story of commercial vehicles is even more depressing. Going by sales trends of the first six months of the current fiscal, the best that this segment will throw up for the whole year is about 7 lakh units. In 2011-12, sales had crossed 8 lakh units.</div><div> </div><div>Quite clearly, trends in the automobile industry sales do not suggest a spectacular or even a sustained recovery. Clearly, Modi and his team have their work cut out. </div><div> </div>
