| Stubbornly
High Inflation a Cause of Concern S P Shah, President
I am happy to see Indian economy grow at its fastest pace
in six months in the quarter through March 2010, fuelled
mainly by government and consumer spending. India s economy
is expected to accelerate to 9 per cent on strong consumer
demand, a better farm output and global recovery.
The year 2009-10 showed clear signs of economic recovery
as it grew 7.4 per cent during the year capped by 8.6 per
cent in the quarter ending March. The economic recovery
in India has been marked by renewed momentum in the manufacturing
sector, which grew by 8.9 per cent in 2009-10, compared
to 3.2 per cent in 2008-09. The industrial output numbers
released recently by CSO are definitely music to our ears,
coming as a whiff of fresh air. IIP during April 2010 grew
by a healthy 17.6% - very close to 20-year high of 17.7%
clocked in December 2009. The robust growth in IIP was led
by manufacturing sector that grew by 19.4%, which is good
for auto industry, especially the commercial vehicle segment.
According to HSBC Purchasing Managers Index, Indian manufacturing
expanded in May at the fastest pace in more than two years.
Manufacturing output grew 16.3 per cent year-on-year in
the last quarter as consumers bought more cars and other
goods. With industrial production in April surpassing all
expectations and sustaining the double-digit growth in the
sixth month running, automobile market is expected to remain
upbeat in the current fiscal.
However, inflation hovering above 10 per cent would be the
major concern going ahead and, to a large extent, determine
future monetary policy. According to OECD, further tightening
of monetary policy to tackle rising inflationary pressures
and avert asset-price bubbles is required to guard the country
against overheating of the economy. While the economy has
been performing well over a period of time now, continuing
high level of inflation has the potential to derail the
high-growth run.
The economists are divided on further tightening of monetary
policy by the apex bank. Some of the experts feel that continuing
high inflation is, essentially, the result of supply side
inadequacies and firm food & commodity prices ruling at
the global level. They, therefore, contend that money-tightening
measures will not be of much help to curb the inflation.
However, if inflation accelerates, the RBI cannot remain
a mute spectator and will come under the increasing pressure
to revise upwards the key policy rates.
Worry on inflation front apart, the recovery in Indian economy
must be looked with cautious optimism in the backdrop of
developing crisis in Europe, triggered by Greece's sovereign
debt crisis and bank failures in Spain.
Auto sector is linked to the economy, and as the economy
picked up, auto volumes too went up with sales hitting record
high. This is despite rising consumer prices and a scorching
summer in most part of the country. Introduction of new
models, low base and improving consumer sentiment have kept
the momentum going for auto market. I feel that the growth
envisaged at 15-16% in financial year 2010-2011 could be
maintained inspite of rising input costs and probable hike
in interest rates.
Needless to mention, the economic recovery and consequent
spurt in demand have been aided by the steep rise in the
salaries of Government employees arising out of the recommendations
of Sixth Pay Commission and the huge spending by the Government
on infrastructure. Besides, government s social programme
has raised income levels in smaller cities and rural areas,
further accelerating the auto sales. However, as the economy
has recovered faster than expected, manufacturers are facing
production constraints due to surge in demand, particularly
for the popular models. In spite of manufacturers ramping
up production since the start of the year 2010, customers,
in some cases, have to wait for 3-6 months for getting delivery
of the models of their choice.
Global auto companies facing a slow growth in existing markets
are making beeline to India and investing to tap the growing
demand here for consumer durables. I understand from the
newspaper reports that Chinese automobile and component
manufacturers are queuing up to drive into the Indian market
with the intention of using it as a low-cost export base.
Chinese companies like SAIC, Foton, FAW, Chery, Geely and
Great Wall have lined up everything from light minivans
to cars, heavy-duty trucks and buses for introduction in
India. While some of them, like SAIC and FAW are routing
their India entry through their global alliance, others
are on the lookout for Indian partners. This is likely to
lead to the competition intensifying further. Customers
could not have asked for more!
With the Indian automobile industry gearing to invest up
to Rs. 80,000 crore in fresh capacity in next four years
and the component industry also investing $ 12 billion up
to the end of 2016, automobile industry in India is poised
for a big leap forward.
Talking about FADAs activities, I am happy to note that
confusion arising out of the switchover to the new emission
norms has finally been put to rest. In the first place,
there was confusion on date of implementation of new emission
norms. Though the Government by issue of a draft notification
on 30th March 2010, had made its intention clear to defer
the new emission norms for 4-wheelers in other than 13 select
cities and in respect of 2/3- wheelers in the entire country
to 1st October 2010, there was an utter confusion within
RTOs, as the final notification was not issued for about
two months, resulting in a state of suspended animation
for registration of vehicles at RTOs. Subsequently, when
the notification finally came in, objections of technical
nature were raised by RTOs in some parts of the country.
On the matter being taken up by SIAM and FADA, the Union
Ministry of Road Transport & Highways has clarified that
the reference date for applicability of new emission norms
is the date of manufacture and not the date of registration.
A text of the Ministry s clarification dated 28th May 2010
is published elsewhere in this issue for the benefit of
automobile dealers.
FADA along with SIAM is also working to take forward the
SAFE Service Initiative launched recently in Chandigarh.
In this regard, FADA had a meeting with select manufacturers
(Maruti, Hyundai & Hero Honda) under the aegis of SIAM along
with insurance companies viz. Bajaj Allianz and ICICI Lombard
to discuss and put the nuts and bolts in place for the Safe
Service Initiative to take off in mid-August 2010.
To make sure that the initiative becomes a reality at the
earliest possible, I, along with other senior members of
FADA, have held meetings with select renowned equipment
suppliers in India, viz. ATS Elgi Ltd/MAHA; Manatec Electronics
Pvt Ltd; Actia India Pvt Ltd; Bosch India; Aro Equipments
Pvt Ltd; and Cartec/Hofmann in Delhi and Mumbai to secure
best terms/prices for Brake/Side-slip/Suspension testing
equipment, for ready reference and convenience of FADA members
who would be setting up such vehicle inspection centres.
FADA is acting as a facilitator; the choice and the final
deal will have to be made by the automobile dealer concerned.
FADA is also working with Auto Monitor for the 2nd edition
of Automotive Dealership Excellence Awards (ADEA) to recognise
and reward automobile dealers who have excelled in various
areas of dealership management. Announcement, along with
details, will be made shortly.
Before I sign off, I once again request fellow dealers to
come forward and participate in large numbers in the initiatives
taken up by FADA for them to be able to serve the purpose
for which they had been started. As always, I shall be too
happy to hear from you all personally on how FADA could
add more value to your special needs and requirements.
With best wishes,
Yours sincerely,
S P Shah |
