Passenger vehicle sales have been on the upswing in India. This augurs well for India’s economic revival.
Passenger vehicle sales have been on the upswing in India. This augurs well for India’s economic revival.Courtesy: ANI

Rising auto sales a pointer to India’s economic recovery

Corroborating evidence coming in from different sectors of the Indian economy says the auto sector posted robust growth in February. Given its deep and wide linkages with other industries, this points to the rebound in India and is laying the basis for high GDP growth in the coming quarters.

Proving purveyors of doom wrong, the automobile sector continued to post rapid growth in February, with passenger vehicle despatches to showrooms rising 23 per cent over last February, commercial vehicle sales growing 3.6 per cent, two-wheelers 11.5 per cent and tractors 25.5 per cent over this period. This was its seventh straight month of growth.

This augurs very well for India’s economic revival, which now seems to be gathering pace, building on the festival season bump and pent-up demand witnessed during the October-December quarter.

Since the automobile sector has backward and forward linkages with more than 200 feeder and downstream sectors, it is just a matter of time before the green shoots of growth begin to spread to a wider swathe of the economy, and provide a concerted push to demand, consumption and more broad-based growth.

Consumers brushed aside concerns about rising fuel prices and thronged motor car showrooms. Keeping pace with this rise in enquiries, automobile companies despatched 308,000 cars and SUVs to dealers in February, a massive increase of 23 per cent over the figure for the previous corresponding month.

The auto sector has backward and forward linkages with more than 200 sectors; so, the green shoots seen here can provide a concerted push to demand, consumption and growth.

The country’s largest passenger vehicle maker Maruti Suzuki maintained its pole position, despatching 144,700 units, up 8 per cent over the despatches last February. The country’s second and third ranked auto majors, Hyundai Motors and Tata Motors, also posted impressive numbers. The former sent out 51,600 vehicles, an increase of 29 per cent and the latter 27,224 units, an incredible gain of 119 per cent.

A part of this rise in passenger car despatches is due to the rising Covid-induced preference among the populace for personal mobility solutions – in place of public transport.

An appreciable rise in commercial vehicle sales sector is considered a proxy for the wider economy and a barometer of economic activity in the country.
An appreciable rise in commercial vehicle sales sector is considered a proxy for the wider economy and a barometer of economic activity in the country.Courtesy: ANI

Commercial vehicle sales also rise

In even better news for the broader economy, companies such as Tata Motors, Ashok Leyland, Mahindra & Mahindra and others have reported greater offtakes of trucks, trailers, tippers and other commercial vehicles.

This sector is considered a proxy for the wider economy and a barometer of economic activity in the country as every industry needs to transport inputs from suppliers to their factories and finished goods from their places of manufacture to dealers and then retailers.

Thus, rising despatches and sales of commercial vehicles is one of the tell-tale signs of an economy on the upswing.

Bollywood superstar Shah Rukh Khan in his signature pose at an auto expo in India. India is today among the biggest global manufacturing hubs for small cars and exports vehicles to several parts of the world.
Bollywood superstar Shah Rukh Khan in his signature pose at an auto expo in India. India is today among the biggest global manufacturing hubs for small cars and exports vehicles to several parts of the world.Courtesy: ANI
A part of this rise in passenger car despatches is due to the rising Covid-induced preference among the populace for personal mobility solutions – in place of public transport.

Auto sector critical to India’s fortunes

It may be noted that automobiles has been one of the biggest success stories in Indian manufacturing. India is today among the biggest global manufacturing hubs for small cars and exports vehicles to Europe, South America, the Middle East, Africa and several other parts of the world, and produced 4.06 million cars in 2018-19, making it the world’s fourth largest passenger vehicle industry. There are currently about 30 million cars on Indian roads.

The auto sector is a proxy for the wider economy. Thus, rising despatches and sales of commercial vehicles is one of the tell-tale signs of an economy on the upswing.

The sector makes up more than 40 per cent of India’s manufacturing GDP and is estimated to employ 37 million people or about 8 per cent of India’s total working population. In addition, the auto components industry, which clocked a turnover of $55 billion in 2018-19 employs three million people.

In fact, several auto sector executives confessed that they could have produced and despatched many more vehicles but for the shortage of critical inputs like semiconductors. A report in The Economic Times, India’s leading financial daily, quoted a senior Toyota Kirloskar executive as saying the Indian arm of the Japanese auto major could have produced 20 per cent more than its February output of 14,069 vehicles had it not been for constraints in its supply chain.

The Maruti Suzuki unit at Gurugram in India. The sector makes up more than 40 per cent of India’s manufacturing GDP and is estimated to employ 37 million people or about 8 per cent of India’s total working population.
The Maruti Suzuki unit at Gurugram in India. The sector makes up more than 40 per cent of India’s manufacturing GDP and is estimated to employ 37 million people or about 8 per cent of India’s total working population. Courtesy: ANI

Back on high growth path

Thus, the robust growth in automobile despatch numbers in February corroborate evidence coming from other important segments of the Indian economy, such as steel, FMCG, etc., and other indicators such as the IHS Markit Purchasing Managers’ Index and the Business Resumption Index, among others, that point to the same inevitable conclusion – that India has left the Covid-induced slowdown behind and is steadily clawing its way back to the high growth trajectory.

From here on, policymakers and industry have to take special care to remove logistics and supply-side bottlenecks to ensure that the rising growth graph sustains.

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