14/08/2019 1:39 PM IST

Here's Why Auto Sales Are Down. And Yes, You Should Be Worried

The fall in auto sales and the reports of massive job losses point to a dismal picture of the Indian economy.

Amit Dave / Reuters
Representational image. 

Automobile sales in India saw their sharpest decline in nearly 19 years in July, dropping 18.71% and leading to 3.45 lakh job cuts, auto industry body Society of Indian Automobile Manufacturers (SIAM) said on Tuesday.

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So why should this matter to you? Here’s your five-point guide:

1. The dip in domestic car sales, according to Livemint, is an important indicator that shows the economy is slowing down. India’s automobile industry employs around 3.7 crore people directly or indirectly. It accounts for 7.1% of the country’s GDP and nearly half of its manufacturing output, according to this Business Today report. While the industry has faced slowdowns before, one big concern this time is that all the segments of the industry—from manufacturers to dealerships to auto part makers—are reporting a decline in sales.

2. There have been multiple reasons cited for the drop in sales, including high GST rates, a crisis in NBFCs and a dip in the purchasing power of consumers. The crisis has led to as many as 3.45 lakh people being laid off due to job cuts at manufacturers, dealerships and auto part makers, said SIAM Director General Vishnu Mathur. Besides, jobs of over 10 lakh workers are at risk, he told NDTV. Representatives from the government have asked for a stimulus package to revive demand ahead of the festive season. 

3. These staggering numbers are just one part of a larger, dismal picture. This handy guide from Livemint lays out all the other indicators that show economic activity is slowing down in India, including falling tractor sales (and hence, rural demand) and a jump in unsold housing units.

4. The growth slump in the FMCG sector also points towards a slowdown. Britannia Industries reported lower-than-expected quarterly earnings this week, and the managing director of the company Varun Berry said, “And that’s a little bit of a worry, because even for a Rs 5 product if the consumer is thinking twice before buying it, then there is some serious issue in the economy.”

5. Spooked by the slew of bad news on the economic front, the government is making efforts to turn the narrative. An IANS report quoted unnamed official sources as saying that the government is working on a stimulus package that could include “tax cuts, subsidies and other incentives”. But for this, it would have to breach its fiscal deficit target of 3.3% (fiscal deficit is the difference between total revenue and total expenditure of the government).    

(With PTI inputs)