The impacts of the fall in the sale of vehicles on the Indian economy and factors responsible for the decline in the automobile sector for UPSC CSE/IAS for Prelims, Mains and PI

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Username akashaky
on 10/09/2019

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The automobile sale continues to be in a state of falling, which indicates the deeper problems that are affecting the Indian economy. In this article, we shall discuss the impact of the fall in the sale of vehicles in the Indian economy and the factors responsible for the decline in the automobile sector.

The impact of the sale of vehicles in the Indian economy.

  • According to the data of the Society of Indian Automobile Management(SIAM), the sale of the automobile for the month of August has declined by 23.55%.
  • Since the Society of Indian Automobile Management started recording the wholesale vehicle sale data(from 1997-98), this is the worst decline for any month.
  • The automobile sale is continuously suffering in India. According to data the sale of the automobile for the month of July has declined by 18.71 % and the sale of passenger vehicles is declining from the last 10 consecutive months.
  • The bigger concern is that the sale of a commercial vehicle has also been declined consistently as the sale of commercial vehicles is seen as an index of commercial growth.
  • Due to the reduction of demand, the automobile industries have started to cut jobs and according to industry estimates around 3.5 lakh jobs have been lost over the last few months.
  • When the sales of Commerical vehicles declined consistently, it indicates the structural problem that is affecting the Indian Economy.

The factor responsible for the decline in the automobile sector

  • Demonetization: This exercise sucked out liquidity (cash inflow) from the market and left lesser money in the hands of the people. Also, it left a deep negative sentiment (the investor attention) in the market.
  • Poor implementation of GST: Poor implementation of GST has significantly increased the prices of vehicles and also the cost of production for the manufactures.
  • Rural Distress: It has left very few amounts of money in the people living in a rural area, which has reduced spending and demand.
  • There are some government policies that have been drafted in order to improve India's environment and safety standards, which has increased the price of vehicles. Ex: In order to improve India's safety standards government has made the installation of Airbags compulsory which ultimately increases the cost of production.
  • National Electric Mobility Plan: India's ambitious plans to switch from Internal combustion Engine vehicles to electric vehicles has forced the consumers to wait and hold back the purchase of vehicles that are driven by ICEs.

Hope it helps.

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