Auto slowdown

| Updated on September 06, 2019 Published on September 06, 2019

This is with reference to the editorial ‘Changing gears’ (September 6). The auto sector is no exception to the general call for a cut in GST. Any reduction here has limitations. First-time car buyers account for 40-45 per cent of the market. The basic issue for quite a while has been the gradual erosion of purchasing power of the consumer and the uncertain state of the economy.

Taxi services account for 9 per cent of the market and may go up to 15-17 per cent in two years. An ICRA study shows most cab aggregators are incurring losses and may not be able to sustain at the current tariff levels. Metros are heavily congested with cars and the consequent lack of parking space is giving a fillip to the use of the cab. Even as manufacturers leverage technology, municipal planning and governance need to keep pace. Mumbai is investing ₹890 crore in smart, integrated traffic signalling. We need to ‘go green’ in more ways.

R Narayanan


Economic errors

This refers to ‘Whose mistakes killed the economy?’ (September 6). Everyone — the present government, the UPA, regulators and India Inc — has contributed in varying degrees for the present dismal performance of the economy. There is no disputing the fact that when the UPA left, it had left behind a GDP growth of 8 per cent. But this was due to a quantum jump in bank lending — a three-fold rise between 2008 and 2014 — which impacted the asset quality, proved later through the AQR (Asset Quality Review) process. Also, the average currency-to-GDP ratio before demonetisation was about 12 per cent, which came down to 9-11 per cent post demonetisation. The informal sector — including MSMEs — which had contributed to 85-90 per cent of the country’s workforce, was hit badly post demonetisation, which in turn led to the economic slowdown. The NDA government introduced a string of reforms aimed at giving a fillip to the economy, which backfired. The RBI as a regulator failed to take pre-emptive action in checking bad loans in banks, which resorted to repeated restructuring of loans which India Inc used to its advantage. The present government needs to initiate tax reforms and take steps for speedy recovery of bad loans to put the economy back on track.

Srinivasan Velamur


Government reforms

Apropos ‘Whose mistakes killed the economy?’ (September 6). Of the three pillars, the government should be held most responsible for the economic mess. Some of the budgetary errors are still taking their toll despite course correction. The sales of commercial vehicles have fallen by 59.5 per cent last month on a year-on-year basis (despite post-budget relief to the auto industry). The rollback of surcharge for FPIs has mostly transferred investment from equity to debt funds.

Besides, the proper use of the infusion of ₹70,000 crore to stressed banks is going to be hampered by HR-related hurdles arising from the merger of 10 PSBs. Unions are up in arms. The government is still analysing whether the economy is suffering from cyclical or structural problems.

Y G Chouksey



GST rates

This refers to the statement of the Transport Minister that he will approach the FM for a GST cut on autos (September 6). The GST on passenger vehicles is 28 per cent, with an added cess of 1-22 per cent, which raises the cost for vehicles quite heavily, and this could be one of the factors causing a fall in the demands. Therefore, Gadkari’s statement on reduction of taxes is a welcome initiative, which might lead to a rise in demand of such vehicles. The fall in demand in the automobile sector has affected employment in the sector, and the proposed reduction might be a welcome step for this reason too. In this context, it is also worthwhile to examine the likelihood of GST causing a slide in other sectors too, so that a substantial relief in the tax might improve demand in the sectors. It would substantially improve the economic situation also.

TR Anandan


Published on September 06, 2019

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