Interim Budget is True to Form S P Shah, President Dear friends, The much-awaited Interim Budget presented by stand-in Finance Minister Pranab Mukerjee has stayed within the conventional boundaries of constitutional propriety and had no surprises to jumpstart the flagging economy. After days of speculation over tax sops and industry packages, the Interim Budget actually turned out to be more of a non-event and did not have any of the bold measures that markets and business community were abuzz with. We in auto industry were also expecting extraordinary measures to tackle extraordinary situation we are faced with. It was an opportunity missed. We must look out for the impending elections and the regular budget for the next chapter of the Indian economic story to play out. There is a realisation now that the adverse impact of global economic meltdown on Indian economy is far greater than what we had bargained for. Macroeconomic indicators point to the fact that we are in for a longer difficult time. The data released by CSO recently suggest that the industrial production in the month of December 2008 contracted by 2%, which is the sharpest decline in the last 15 years. The December decline comes on the top of none-too-rosy figures of factory output for the months of September, October and November 2008. Moderation in economic growth and tax collections has resulted in the fiscal deficit rising to 6 per cent of gross domestic product in 2008-09 from a planned 2.5 per cent, a rise that could shake investors increasingly wary of emerging markets. Although the Government has estimated a deficit of 5.5 per cent of GDP in 2009-10 but implied this could rise, as government spending may have to jump later this year to shield the economy from a global slump and stem job losses. The growth of agriculture has also moderated to 2.6% against the previous year's growth rate of 4.9 per cent and against targeted growth of 4.0%, which could mean far-wider slowdown in demand, as 60% of the people in India are still dependent on agriculture. Even today, it is the level of growth of agriculture sector, which essentially drives or drags the demand in India. While the interim budget may have failed to cheer business community, there are a number of positives that rekindle the hope. With GDP growth estimated at 7.1% for the year 2008-09, India remains among the hottest economies. In fact, India is the second fastest growing economy after China that is expected to grow at 8%. Inflation inching down to 4% continues its downward spiral. Importantly, global oil prices have stabilised at around $40/barrel, which is comforting. As the inflation at less than 4% is within the comfort zone, we expect RBI to roll out further monetary measures to ease credit squeeze and soften interest rates. In spite various measures taken by the apex bank to inject liquidity into the system, the private banks are still overcautious in lending for vehicle purchases and interest rates have not come down significantly. It is heartening to note that public sector banks are coming forward to fill the space vacated by the private banks. With inflation stabilising, there is definitely headroom for RBI to come up with further steps aimed at easing credit availability and reducing interest rates to give fillip to the demand. Hopefully, this will come about soon. Regarding activities of FADA, I am happy to inform that an 11-member delegation of FADA visited the USA and participated at 92nd NADA Convention & Expo scheduled for 24th to 27th January 2009 at New Orleans, Louisiana. It was an enriching experience for all of us in the FADA delegation. The scale at which the NADA Convention is mounted has to be seen to be believed. There were 15,000 attendees at the Convention and 500 companies exhibiting their products and services at the Expo. The Convention had a special significance for FADA and me, in that a workshop on Indian auto industry was scheduled as a part of the programme. This goes to show that the Indian auto industry has arrived on the global auto landscape. India's strength in frugal engineering as demonstrated by the design, development and manufacturing of low cost small cars exemplified by the Nano and two-wheelers that combine unmatched fuel efficiency and performance, is being recognised across the world. Our Vice President Nikunj Sanghi and I had the opportunity of making presentation and interacting with the participants at the workshop on challenges and opportunities offered by Indian auto industry. The workshop was repeated over a period of three days. The participants at the workshop also had the benefit of presentation made by the auto consultant Ashvin Chotai, MD, Intelligence Automotive Asia based in London. The discussion was lively, which was quite natural given the fact that India is the emerging powerhouse in automotive world. NADA founded in 1917 has come a long way since and has about 20,000 franchised new car and truck dealers as its members. Needless to mention, NADA is force to reckon with in political and business circles and its opinion and voice carries a lot of weight with the power that be and manufacturers. What is interesting to see is that the manufacturers and the dealers have been jointly fighting the battle for bailout and revival of auto industry. The US auto industry and retail trade have managed to shift the focus away from Wall Street to the Main Street, making a strong case that continuing slowdown in car demand and consequent financial problems faced by auto industry and retail would render millions of people out of the job. In 2008 alone, 700 auto dealerships closed down in the US and NADA expects another 900 dealerships downing their shutters in the year 2009. The recent legislative amendment allowing tax deduction for the sales tax paid on purchase of new cars for the people with income below a threshold is the result of such sustained effort. The auto retail in India too plays an important role in the national economy. The importance of this business activity can be gauged from the fact that automobile dealers in the organised sector, having invested about 30,000 crores, provide direct employment to about 5 lakh people in India. Contribution to the Central & State Exchequers by way of various taxes and levies is whopping Rs. 70,000 crores. Its far-reaching linkages and, especially its spin-off on finance, banking, insurance and oil sectors needs no overemphasis. We, the automobile dealers spread across the country, must network at the national, State and local levels and strive to drive home this message among the Government authorities, industry and society at large. The other thing we must do, as responsible corporate citizens, is to commit ourselves to community service and social work in the areas of environment, road safety and human development. I have no doubt that most of the automobile dealers are already discharging their corporate social responsibility and are engaged in various charitable and social activities. We need to highlight these activities and create awareness. You will be glad to know that Delhi has become the fourth centre in the country to start FADA Academy training programme, jointly with JobGuru - a division of Idea 7 Automotive with which FADA has tied up for the purpose. As you may be aware, FADA Academy Programme has been revived of late and is high on the agenda of current Council. While the programme is chugging along, it is yet to gather speed. Having regard to the fact that automobile dealers all over the country are facing huge manpower shortage, we need to have such centres in various parts of the country. Any member of FADA, who is keen to start the training courses in his/her city/State, can get in touch with me. FADA will render all possible support and assistance to make it happen. Look forward to your views and suggestions. Best wishes, Yours sincerely, S P Shah