Heavy Industries Minister Praful Patel recently conveyed that he is quite optimistic regarding the near future and communicated that the slowdown in domestic car sales is a phenomenon that is temporary in nature and is expected to die out soon. Patel conceded that the stiff interest rates that have shown no signs of improvement so far, have adversely affected the automobile sector and calls for concern. He also stated that the slowdown has brought down the overall growth rate of Indian auto sector. He confirmed that the automobile sector would play a major role in shaping up the future as a whole.
“There is a cause of concern due to interest rates hardening. This certainly has affected the auto sector. But we hope that this is a short-term phenomenon and it may improve as other economic indicators improve.” Patel said. He was addressing the media on the sidelines of the Society of Indian Automobile Manufacturers' (SIAM) annual summit in New Delhi.
On the other hand, the words coming from the horse's mouth recites a different story. Arvind Saxena, Director, Marketing and Sales, Hyundai Motor India said that “The market continues to be tough and there are no signs of recovery in the immediate future.”
The auto industry got huge blows majorly in this fiscal year with the passenger car segment growing by a mere figure of 7 percent in May. As far as June is concerned, cars sales crawled at the slowest pace with a year-on-year growth rate of a negligible 1.62 percent in the last 27 months.
Moreover, in July, domestic passenger car sales too, bore the brunt and descended by a staggering 15.76 percent year-on-year for the first time in last 30 months. The last 30 months had witness a phase of continuous growth and ascent.
The phase of falling sales of automobiles arose mainly due to the increase in interest rates and hikes in fuel prices in recent months. The Reserve Bank of India (RBI) has already hiked interest rates 11 times since March, 2010, to poise the demand and get control over inflation. It is expected to announce its next mid-quarterly policy review on September 16.
The inflation figures for the month of July stood at 9.4 percent. Expressing concern over the mountain like inflation rate, Patel said inflation has to be curbed and stringent measures have to be taken. Also, the entire world economy facing the crunch and so it has its own complicated consequences on the country's economy.
Petrol prices are still far from being tamed and have risen by 21 percent since the government decided to free them from its control in June last year. The price of petrol is a serious concern and poses a huge threat to India's economy. In Delhi the price of petrol has swelled up to Rs. 63.70 a litre now from Rs. 51.43 a litre when the government deregulated the fuel on June 26, 2010.
Moreover, the government has hiked the diesel price to Rs. 41.21 per litre in June this year. Thus, the government and the citizens hope that stringent measures and effective steps may vitiate the overall adversities that the country faces today.
