A Mixed Bag Pradip R Kamdar, President The year 2008-09 has got off to a cautious start. Signals emanating from economy and auto industry present a ray of hope and worrisome portents. The upside is that the Indian economy continued to expand at a robust pace during 2007-08 for the fifth consecutive year. According to the advance estimates released by Central Statistical Organisation (CSO), the real GDP growth rate was placed at 8.7 per cent in 2007-08 as compared with 9.6 per cent in 2006-07, reflecting moderation in growth in all the three sectors, viz., agriculture and allied activities, industry and services. Notwithstanding the moderation, the growth performance was in tune with the high average real GDP growth of 8.7 per cent per annum during the five-year period 2003-04 to 2007-08. Another piece of good news is that the Third Advance Estimates for 2007-08 reveals that the total food grain production is slated to reach an all-time high at 227.3 million tonnes, recording an increase of 4.6 per cent over the previous year (217.3 million tonnes). While the agriculture per se constitutes less than 20% of GDP, it is essentially the performance of agriculture sector that sets the growth momentum going. RBI has forecast the GDP growth during the year 2008-09 to be 8-8.5%. On the flip side, there is a palpable moderation in industrial production (IIP) with manufacturing sector's growth slowing down to 9.1 per cent during 2007-08 (April-February) as compared with 12.2 per cent during April 2006 to February 07. Having recorded a growth of 5.6 per cent during the period April 2007 to February 2008, as compared with 8.7 per cent growth during the corresponding period of the previous year, the infrastructure sector has also seen a deceleration. Inflation continues to hover over 7.5% mark. This being the election year, the Government is going all out to contain the menace, lest it should spoil the party. With inflation well above the RBI's comfort level of 5-5.5%, money supply growing at 21 % as against the target of 17%, global inflationary pressures unabated and business confidence still fairly strong, the apex bank has further hiked the CRR by 25 bps over and above 50 bps hike announced earlier. Reining in inflationary expectations has become a top priority for the Government even at the cost of growth. As was expected, the monetary tightening measures of RBI have started to take their toll on auto loans. The recent increase in interest rates on auto loans by some of the banks is likely to put further pressure especially on two-wheeler and commercial vehicle markets that have been reeling under slowdown for the last one year. Volatility in international prices of crude oil, which have reached $ 120/barrel, is a major worry. What is worse is that the crude oil prices in the global market continue to head north relentlessly with no sign of stabilising. There is already a debate raging over bio-fuels, which are derived at the cost of food security, deforestation, eco-system destruction and carbon losses, serving the twin objective of energy security and reducing greenhouse gases. Fear expressed in some quarters is that the purported cure for global warming - which bio-fuels are claimed to be - may in the long run turn out to be a contributor to the problem, which is adding fuel to the fire. All said and done, the Indian economy is still doing very well clocking over 8% growth. Domestic savings and capital investments are on the rise suggesting that the business sentiment in India continues to be upbeat. Services sector stays on double-digit growth track despite rupee appreciation and overall slowdown. Above all, we are likely to see significantly higher spending by the Government in this year on infrastructure, social and rural sectors because of impending elections. All this should augur well for the auto industry. The sales figures for the month of April are encouraging if not exhilarating. While hoping for the best, there is a word of caution. We can ill-afford to lower our guard. The Government on its part has to calibrate its policies ensuring sustained growth of the industry. We, in the automobile retail trade, do appreciate the steps taken by the Central Government over a period of time in facilitating the growth of auto industry. However, the State Governments have, at times, come up with the measures that are not exactly conducive to the growth momentum. The recent hike in VAT rates by the States of Gujarat and Kerala is illustrative of the dichotomy between the policies of the Central and the State Governments. The Central and the State Governments have to work hand-in-hand. Only then can we see the Indian auto industry firmly entrenched in global arena. Regarding the activities of FADA since my previous column, we have not had much action, as my fellow dealers were busy in meeting their annual targets and compiling the year-end data. After a short lull, we are back in the thick of action. You will see a lot of things happening in the days to come. Meanwhile, I appeal to my fellow dealers in different parts of the country to organise regular interactions at the city, State and regional levels. I and, for that matter, my colleagues in FADA Council, shall be happy to join you at such meetings to post you with the scenario in various parts of India and globe. Such interactions at the regular intervals help foster a better understanding among automobile dealer fraternity and keep each other in the loop on the latest developments. These meetings also help identify challenges, concerns and auto retail practices across India and abroad, which can be taken up by the State-level association and FADA for appropriate action at the State and national levels. I look forward to your suggestions and inputs for further strengthening the activities of FADA aimed at promoting the growth and development of auto retail trade in India. With best wishes, Yours sincerely, Pradip R Kamdar