A
Roller Coaster Ride
Binod Agarwal, President
Dear friends,
After enjoying an excellent run for 4 years, domestic automobile
market is definitely showing sign of fatigue. The sale numbers
for the month of April and May are not something to rave about.
It appears that the interest squeeze is making its impact
felt.
However, overall picture of economy, which is emerging is
very encouraging and does not call for pressing the panic
button. According to the quick estimates released by CSO recently,
the economy grew by healthy 9.4% during the year 2006-07,
which is the best performance in the last 18 years. The economy
had grown by 10.5% in the year 1988-89 on the low base due
to severe drought in the previous year. The consistent 9%
growth in the last four years underlines India's emergence
as a global economic power and should inspire confidence that
the current slowdown is a temporary phase.
And unlike in the past when GDP growth did not translate into
much in per capita terms thanks to the rapid growth in population,
this time round, per capita income too has grown an encouraging
8.4 %. The good news does not end there. At the disaggregated
level, CSO numbers show gross fixed capital formation for
the year at 27.9% as against 26.7% in 2005-06, lending credence
to the belief that the present phase of strong growth is investment-led.
This is a happy augury. It implies our growth has strong moorings
and, more crucially, that the present phase of rising inflation
may be coming to an end as additional capacity comes on stream
and supply gets augmented. This belief is strengthened by
the strong double-digit growth in manufacturing. Macroeconomic
fundamentals being strong, there is no reason why the market
will not bounce back.
On the flipside, unfortunately, agriculture growth at 2.7%
is still very low given that more than 60% of our population
is dependent on the sector. Moreover, even as GDP for the
year grew by an encouraging 9.4%, quarterly growth numbers
suggest a slight slowing down in the growth momentum compared
to the previous year. GDP growth in the third and fourth quarters
of 2006-07 was 8.7% and 9.1% compared to 9.3% and 10% respectively
in 2005-06. More worryingly, the services sector, the main
driving force behind the recent robust growth, seems to be
running out of steam.
All said and done, there is a sufficient evidence that the
economy is settling down to a more sustainable growth trajectory,
as an average growth rate of 8.9% in the last two quarters
hardly qualifies as a slowdown.
I am of the view that we can even better this performance
and that 10%+ growth is within the realm of reality if the
reform process and infrastructure development are speeded
up. The road infrastructure development, in particular, has
not been keeping pace with the ambitious plans drawn up by
the Government.
The good news on road development programme is that the Government
has recently decided to pump in Rs. 20,000 crore for six-Ianing
of 3000 kms highways under Phase V of the NHDP in 2007-08.
Of the 6500 kms of four-Ianed highways to be six-Ianed under
Phase V, this is almost 50% of the entire Phase V. While the
policy decisions have been taken and announced from time to
time, the crux is the implementation of these decisions on
the ground. In accordance with the ambitious target laid down
by the infrastructure panel led by the Prime Minister, though
the work would be awarded during the current fiscal, when
the phase gets completed remains to be seen, if the past experience
is any guide. Sample this. Phase II of NHDP, which envisages
upgrade of national highways connecting North-South and East-West,
is only 11% complete. Under the ongoing phase III-A, only
30 kms of highways have been upgraded as against the proposed
upgrade of 40000 kms highways. Phase IV that involves two-Ianing
of 20000 kms of roads in far-flung areas is still on paper.
While we do appreciate and welcome the well-meaning initiatives
of the Government in the area of road infrastructure development,
the Union Government needs to come up with a mechanism to
ensure better coordination with the State Governments for
land acquisition and to rein in errant contractors, in order
to avoid time overruns.
Nevertheless, the upbeat sentiment arising from the impressive
numbers reeled off by the CSO should cheer all of us. Hopefully,
the growth momentum of auto industry would pick up and we
would be witnessing robust sales numbers soon.
Regarding FADA's activities, I had, in my previous column,
invited proposals from our esteemed members associated with
or running management or technical institutes to partner with
FADA Academy Programme. The programme aims at conducting regular
courses, comprising theoretical and practical content, for
producing trained sales executives, service supervisors and
spare parts supervisors, who are effective in automobile dealerships
from day one. The programme has already got going at Pune,
Kolkata and Kolhapur. FADA would like to expand the programme
to cover the entire country so that the acute shortage of
trained manpower facing the automobile dealerships and their
workshops across the country could be addressed in some measure.
I look forward to your proposals for associating with FADA
to launch training courses at various places across the country
as well other inputs and suggestions for making FADA more
meaningful to its membership.
With best wishes,
Yours sincerely
Binod Agarwal |
