Modi sarkar economic reforms/governance performance thread

[Stan AF]

Army may trim 27,000 non core units

 

 

 

https://timesofindia.indiatimes.com/india/army-may-trim-27000-from-non-core-units/articleshow/70651072.cms

Edited August 13, 2019 by Stan AF

[Stan AF]

 

Passenger Vehicle Sales Decline Continues for 9 Consecutive Months, Drops 31 Per Cent in July

The Passenger Vehicles sales in India is seeing one of the worst slowdowns in its history and has registered another drop in sales in July 2019.

 

 

 

Declining for the ninth consecutive month, domestic passenger vehicle (PV) sales dropped 30.98 per cent to 2,00,790 units in July, from 2,90,931 units in the same period a year ago. Domestic car sales were down 35.95 per cent at 1,22,956 units as against 1,91,979 units in July 2018, according to data released by the Society of Indian Automobile Manufacturers (SIAM).

 

Motorcycle sales last month declined 18.88 per cent to 9,33,996 units for the month as against 11,51,324 units in the year-ago period. Total two-wheeler sales in July declined 16.82 per cent to 15,11,692 units compared to 18,17,406 units in the year-ago month. Sales of commercial vehicles were down 25.71 per cent to 56,866 units in July as compared with 76,545 units in the year-ago period, SIAM said.

 

 

Vehicle sales across categories registered a decline of 18.71 per cent to 18,25,148 units from 22,45,223 units in July 2018, it added. In fact, all vehicle categories witnessed a decline in sales during the month.

 

https://news.google.com/articles/CAIiEDlSvwU9SGCf6WKTf44lsl8qGQgEKhAIACoHCAow5qqNCzD4q58DMNXIpwY?hl=en-IN&gl=IN&ceid=IN%3Aen

[Stan AF]

42% firms taken to IBC tribunals belong to manufacturing space, reveals bankruptcy data

Banks and vendors (operational creditors) have dragged 90 percent of the 2,162 bankrupt companies to tribunals under IBC

 

 

 

Manufacturing, real estate and construction firms account for nearly two-thirds of all companies facing bankruptcy proceedings since the new Insolvency & Bankruptcy Code (IBC) came into effect in 2016, official data showed.

 

Data shared by the Insolvency and Bankruptcy Board of India (IBBI), which administers the bankruptcy code and regulates professionals, showed that manufacturers alone accounted for 42 percent all companies in distress. Companies in the services segment, including hotels, restaurants, transportation and communication businesses, too, face acute financial distress, accounting for 15 percent of the 2,162 cases before the bankruptcy tribunals.

Asia’s third largest economy grew 6.8 percent in FY19, with GDP expanding by just 5.8 percent in the quarter-ended March, the slowest in five years. Consequently, India lost the tag of being the fastest growing major economy in the world to China, which recorded gross domestic product (GDP) growth of 6.4 percent in the March quarter.

 

Fears of a global recession and mounting trade war tensions between the US and China added to the downside risks to the Indian economy. This has forced the Narendra Modi administration to start extensive consultations with the chiefs of industry and the financial sector, to find a policy response.

 

https://www.moneycontrol.com/news/business/42-firms-taken-to-ibc-tribunals-belong-to-manufacturing-space-reveals-bankruptcy-data-4328501.html

[Stan AF]

Consumers thinking twice before buying a Rs 5 pack: Britannia

Britannia controls one-third of the market and has gained almost 1.3% in the June quarter

 

 

The overall slump in the economy, while impacting discretionary spends, hasn't spared the value pack categories in the fast-moving consumer goods (FMCG) sector.

According to the leading biscuits, bakery and dairy products manufacturer Britannia Ltd, the liquidity crisis and issues concerning the non-banking financial companies (NBFC), etc. aren't the ones impacting the non-discretionary product categories. It's what the consumer is feeling about where they are, that's affecting sales.

 

Varun Berry, managing director, Britannia Ltd, said the company controls one-third of the market and has gained almost 1.3% share in the June quarter. "However, we've grown only 6% and the market is growing slower than that. 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."

 

OGGY GROWTH

Britannia controls one-third of the market and has gained almost 1.3% in the June quarter   The rural market has started to grow slower than urban, which has itself slowed down

"Also, if you look at various investment vehicles be it real estate, stock market or any other vehicle, everything has been trending downwards. Consumers have been feeling stressed about the fact that they (investment vehicles) were used to be worth a certain amount and that has come down fairly dramatically," said Berry in an earnings call on Friday.

 

The biscuit maker was outpacing the market till now, but the growth numbers are not good enough to write home about. "Previously, what used to happen is that the market would grow 7% and we would grow 10-11%. But this quarter the market is growing at a very, very low pace and we are outpacing it by a mile, but still not able to get to a number that we aspire for. So that is what I would say is the issue," he said.

The slowdown is not going to go away, Berry said, until the feel-good factor comes back and the investment vehicles start to power back. "It might ease up a bit, it may not be as dark as we've seen it to be in the last two quarters. However, I don't think it's going to completely go away in a hurry," he said.

 

The FMCG players are seeing turmoil in the market, particularly in the rural markets, which is impacting the value segment, the main driver in the rural markets.

Berry said about a year ago the rural market was outpacing the urban market almost by one-and-a-half times. "What we've seen now is that the rural market has started to grow slower than urban, which has itself slowed down," he said.

On recovery, Berry said the market will continue to see a slowdown for two or three quarters after which it will start to come back slowly. "I think the issue with most companies, including us, is that while we've become very good at gaining share, we still haven't figured out the formula of showing growth in the category itself. But in this case, because the issue is looking tough at this point in terms of market growth, we will have to make sure that we take on that leadership position to get this market to grow again. I'm sure other players like Parle and ITC are also looking at the same and will do things to rejuvenate the market. I think in the next six to eight months, we will start to see this coming back," Berry said.

 

https://www.dnaindia.com/business/report-consumers-thinking-twice-before-buying-a-rs-5-pack-britannia-2781047

[Stan AF]

Real estate crisis: Homebuyers stay away, builders left with big inventory

By: Shubhra Tandon |

Published: July 29, 2019 5:30:15 AM

Experts at Liases Foras put the average cost of an apartment at Rs 60 lakh, but in cities such as Mumbai, Delhi or even Bengaluru, it is well above this.

In Mumbai, most of these properties are concentrated in the southern and central parts of the city — Prabhadevi, Parel, Mahalaxmi and Lower Parel. (Representational image)

With nearly 10 lakh homes unsold across India’s top seven cities, builders today are sitting on a staggering Rs 6 lakh crore worth of inventory. That’s not so surprising, given how asset prices have remained more or less stable while incomes haven’t grown.

Experts at Liases Foras put the average cost of an apartment at Rs 60 lakh, but in cities such as Mumbai, Delhi or even Bengaluru, it is well above this. In fact, a recent survey by the Reserve Bank of India noted how the ability to purchase a home or affordability had worsened over the past four years. Mumbai remains the least affordable city, the survey said.

Also read: This is what Elon Musk, Bill Gates, Warren Buffett agree on; and it isn’t about cars, softwares, or investments

An imperfect situation has arisen in India’s real estate market where sales are not growing but supply remains high.
Liases Foras MD Pankaj Kapoor said capital values have grown disproportionately in the last few years, which has made real estate more unaffordable. While prices have not risen in the last four years, affordability has not improved,” he said.

Indeed, even purchases of luxury apartments in Mumbai are slow and unless they pick up pace, it could take a quarter of a century for the inventory to get cleared. A check done by FE shows just about 200 upmarket were bought in the last three years, leaving close to 2,100 apartments unsold. At an average price of Rs 20 crore for an apartment that’s some Rs 40,000 crore of money stuck. Mumbai accounts for close to 60% of the inventory but real estate experts say demand is dull even in Bengauluru, New Delhi and Chennai.

In Mumbai, most of these properties are concentrated in the southern and central parts of the city — Prabhadevi, Parel, Mahalaxmi and Lower Parel. With apartments typically between 4,000 sq ft and 7,000 sq ft large and costing Rs 25,000-Rs 30,000 per sq ft, there are not too many takers. For ready-to-move in-projects, the cost is, understandably, somewhat steeper and in the range of Rs 65,000-Rs 80,000 per sq ft. Though builders have cut down the size of the apartments, there are few buyers.

The premium real estate market tends to move in fits and starts, say experts. However, investors seems to have moved out of this space which is one reason for the slow offtake. ANAROCK Property Consultants chairman Anuj Puri said the demand even in luxury segment is now end-user driven, a shift from the situation three years ago, when it was driven by investors.

In the six months of January-June 2019, the top seven cities saw a total new supply of nearly 1,39,500 units across all segments. Of this total, nearly 8,120 units were launched in the luxury segment priced in the range of Rs 2 crore-Rs 5 crore forming 6% of the total supply, nearly 900 units in the price bracket of Rs 5 crore-Rs 10 crore formed 1% share of total supply, and nearly 320 units in the ultra-luxury segment priced above Rs 10 crore.

 

https://www.financialexpress.com/industry/real-estate-crisis-homebuyers-stay-away-builders-left-with-big-inventory/1659020/

[rkt.india]

India smartphone market grew 7% in Q1 2019: IDC

NEW DELHI: With a total shipment of 32.1 million units, India's smartphone market grew 7.1 per cent year-on-year (YoY) despite the global market falling by six per cent during the same period, a new report by the International Data Corporation (IDC) said on Monday. 

The research showed that despite the government's new e-commerce rules, online channels managed to sustain their pace, registering 19.6 per cent year-on-year growth in Q1 2019. 

Xiaomi maintained its leadership position, growing YoY by 8.1 per cent in Q1 2019 while Samsung was at the second position with a decline of 4.8 per cent in Q1 2019. 

Vivo grabbed the third position as its shipments doubled in Q1 2019 whereas OPPO recaptured the fourth position with a year-on-year growth of 9.7 per cent. 

"Fuelled by attractive offers and new launches by vendors like Xiaomi, Samsung, Realme, and Huawei, online sales reached 40.2 per cent of the market in Q1 2019 .. 
 

Read more at:
//economictimes.indiatimes.com/articleshow/69310193.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

https://economictimes.indiatimes.com/tech/hardware/india-smartphone-market-grew-7-in-q1-2019-idc/articleshow/69310193.cms

[Stan AF]

Combination of structural, cyclical factors reason for current economic slowdown: SBI study

Business Press Trust of India Aug 14, 2019 19:08:07 IST

 

New Delhi: The current economic slowdown can be attributed to a combination of structural and cyclical factors, in addition to global uncertainties, an SBI study said on Wednesday.

The country's economy is showing signs of slowdown, with hi-frequency indicators like industrial output posting subdued growth and automobile sales touching historical lows.

"The reasons for the current domestic slowdown, apart from the global uncertainties look like a combination of both structural and cyclical factors," State Bank of India (SBI) said in its research report 'Ecowrap'.

It said there are clearly a host of structural factors that are holding back current consumption.

Representational image. Reuters.

A substantial decline in wage growth (both rural and urban wages) in recent times resulting in lower household savings (a result of conscious policy decisions to correct macro imbalances) has possibly slowed down the growth in real per capita income that is holding back demand, it said.

The share of private sector has declined from 50 percent during 2007-14 period to 30 percent during 2015-19 in new project investments (in value terms).

A possible increase in current capacity utilisation (at 76.1 percent) can happen only if the sector-specific issues are simultaneously addressed to boost demand of bank credit, the report said.

 

On automobile sector slowdown, Ecowrap said it is not restricted just to India, but the impact is felt across geographies with China also facing the brunt of the auto slowdown.

Even in the US, after a long period of auto sector sluggishness, the July numbers gave some respite but that also may be an impact of the base effect.

In Germany too, the auto sector witnessed a production decline of 12 percent in the first half of the year.

"The criticality of automobile sector can be gauged by a humongous 30 million employment on a per annum basis which it generates. Out of this more than 50 percent could be of contractual nature, hence the seriousness of the current auto slowdown," it said.

Referring to the external environment, it said the global economy is currently in uncharted territory.

The assumptions which "we hold for reasonably predicting the future" do not seem to be holding up and the global economy is witnessing outlier events on a daily basis, the occurrence probability of which is practically non-existent given the assumptions.

For example, it said Argentina's stock market declined by 38 percent in a single day, the largest one-day decline in its history.

Independent observers suggest that this was a 17-sigma event, which means that it should not have happened even once in the history of the universe, the report noted.

Updated Date: Aug 14, 2019 19:08:07 IST

 

https://timesofindia.indiatimes.com/business/india-business/slowdown-in-economy-due-to-structural-and-cyclical-factors-sbi-study/articleshow/70678835.cms

 

https://www.firstpost.com/business/combination-of-structural-cyclical-factors-reason-for-current-economic-slowdown-sbi-study-7165281.html

[mishra]

@Stan AF Lets cut some slack to Modinomics. Global economy is slow and FT predicted that Global recession is imminent based on Bond Market activities.

 

So any growth of India above 5% is not bad

[Stan AF]

 

[Stan AF]

Why this economic slowdown is serious

Market-based economies thrive on hope and belief of profit by private entrepreneurs. In the times of negative market sentiments, the government increases its expense to bring back hope. But the Narendra Modi government's hands are tied at the moment.

 

 

The economic slowdown presents a serious challenge to the Narendra Modi government as it sets a target of making India a $5 trillion economy in five years. (Photo: PTI)

HIGHLIGHTS

• Auto sector is facing worst crisis in about 20 years
• In real estate sector, number of unsold homes have increased
• When government needs more money, tax collection has grown by just 1.4%

 

Suppose you inherited a farmland and a house. You grow your own food using family bank of seeds. You don't use chemical fertilisers and prepare organic manures using cow dung and similar stuff on your own. You don't buy fodder for your cattle or poultry which fulfil your milk and meat requirements. You use biogas as fuel for household energy. This means you have a self-sustained viable economy. But you are contributing nothing to country's gross domestic product (GDP) as you are not using money.

 

 

Now, consider this. Your neighbour works in a factory and earns a salary. She buys grocery from a kirana store, milk and butter from a dairy parlour, clothes from a shopping mall, dines out and watches a movie or a play on weekends, employs a help in her home and pays taxes. Her activities are the guarantee that the country's GDP clock is ticking upward.

Every single purchase by her begins a chain of purchase and sale. The kiranawallah goes to wholesale market to buy stuff for shop. The wholesale market sources its supplies from the farmers, who purchase seeds, fertilisers, tractors, diesel and employ labourers on their fields. All are paid in money. This is repeated for every single purchase by your neighbour. She ensures flow of money that defines growth of measurable GDP.

This chain of sale and purchase has shown signs of slowdown over the past few months. It is visible in almost every sector of the Indian economy. The result was worrisome for 2018-19, for which the GDP growth rate was 6.8 per cent.

 

This is the slowest growth rate of GDP since 2014-15. The previous low was 6.39 per cent in 2013-14 following which the Narendra Modi government came to power in 2014.

Recent GDP figures have only aggravated the concerns of economic slowdown. According to Central Statistics Office, India's GDP slowed to a five-quarter low of 6.6 per cent in October-December 2018.

It fell below 6 per cent mark in January-March 2018-2019. At 5.8 per cent, the March quarter growth rate pushed India behind China after seven quarters. But that rivalry is the least of the worries for Indian economy. There are ominous signs showing that slowdown is deep.

 

 

Auto sector

Automobile sector is facing its worst crisis in 20 years. Reports say around 2.30 lakh jobs have been lost in the auto sector. A large of it is being blamed on the global trend accentuated by the Brexit situation.

But what signals a deeper problem is the Society of Indian Automobile Manufacturers (SIAM) report that 300 dealerships have shut down in recent times. Sales of cars, tractors, two-wheelers have declined considerably. SIAM said about 10 lakh jobs have been hit in the auto component manufacturing industry.

 

Real estate

The health of real estate is a massive indicator of the state of Indian economy. It has links with about 250 ancillary industries -- bricks, cement, steel, furniture, electrical, paints etc -- and affects them all if there is a boom or gloom in the sector.

Reports are that the volume of unsold houses over the past one year has increased in the top cities of the countries. According to real estate research company Liases Foras, the unsold inventory currently stands at 42 months.

This means it will take three-and-a-half years for the existing unsold inventory (read flats/houses) to clear up. An efficient market maintains 8-12 months of inventory, the company said.

 

 

FMCG at slow pace

The fast-moving consumer goods (FMCG) companies have reported decline in volume growth in the April-June quarter. This has been blamed on a sluggish rural demand, which, in turn, indicates less availability of money in villages.

Reports say that the demand for FMCG in rural India was growing at 1.5 times of the urban demand. The rural demand has come down to the level of urban growth or below.

FMCG major Hindustan Lever reported volume growth of 5.5 per cent in April-June quarter compared to 12 per cent last year. Dabur posted a growth of 6 per cent against 21 per cent last year.

Britannia Industries recorded a volume growth of 6 per cent against 12 per cent in the same period last year. Asian Paints saw a volume growth slump from 12 per cent in April-June quarter last year to 9 per cent this year.

 

 

Bank's lending to MSME

At macro-level, lending by banks to industries shows a significant jump from 0.9 per cent in April-June quarter in 2018 to 6.6 per cent for the same period this year. This should reflect in job growth in industries but the employment situation is dismal.

While the labour force survey, released by the government in July, showed a record high unemployment rate of 6.1 per cent for 2017-18, recent Reserve Bank India report does not present a brighter picture. The RBI consumer confidence survey showed a drop in consumer confidence for July over pessimist situation in job creation and overall economic scenario.

 

This contradiction is explained in the details of pattern of lending by banks, which have extended credit to big industries while money flow to medium- and small-scale enterprises, which are the biggest employers.

The credit to big industries grew by 7.6 per cent during April-June compared to 0.8 per cent last year. Lending to MSME (micro, small and medium enterprises) by banks has actually slipped from 0.7 per cent in 2018 to 0.6 per cent this June quarter.

Government's hands tied

Market-based economies thrive on hope and belief of profit by private entrepreneurs. When market sulks under negative sentiments in the market, the government infuses money to bring back hope. But the central government's hands are tied.

In India, the government expenditure accounts for around 10 per cent in the economy. With the government sensing an economic slowdown, it increased expenditure by 19 per cent in 2017-18 and 13 per cent in 2018-19. This was the highest increase in government expenditure since 2008 financial meltdown.

To do a repeat, the government needs more money. But revenue collection is moderate for April-June quarter -- at Rs 4 lakh crore registering a growth of less than 1.5 per cent. To put in perspective, the gross tax collection growth for April-June 2018 was over 22 per cent. Simply put, the government does not have enough money to invest in the economy.

 

 

Read | Auto sector crisis: 2.30 lakh jobs lost as industry faces worst crisis in 20 years

Also read | Annual GDP falls to 6.8% from 7.2% last year, March quarter growth slower than China

You may like to read | From policy paralysis to economic paralysis? Modi govt is decisive but

Watch | Is PM Modi's goal of $5 trillion economy by 2024 a pipe dream?

[Stan AF]

Tracking India's economic slowdown: Narendra Modi govt has a herculean task ahead to pep up growth with dying private investment

Business Vivek Kaul Aug 14, 2019 15:23:27 IST

 

Editor's note: This is the third part of a multi-part series in which Firstpost’s columnists will analyse the ongoing economic slowdown and offer solutions.

 

Over the last few weeks, there has been a spurt of news articles on the economic slowdown.

Car sales are down. Two-wheeler sales are down. Even mopeds are not selling as much as they did.

The volume growth, or the number of packs sold, of Fast-Moving Consumer Goods (FMCG) companies has slowed down big time.

New investment projects are barely being announced and there has been a huge drop in the projects being completed.

 

 

Exports are stagnant and the government’s collection of taxes have been more or less flat.

 

There is more than enough evidence of the economy slowing down. In fact, as this news report points out, people are thinking twice even before buying a Rs 5 biscuit pack. The question is why. Let’s take a look at this pointwise.

 

1) The Gross Domestic Product (GDP) of an economy consists of four parts: Private consumption expenditure, investment, government expenditure and net exports (exports minus imports). In the Indian case, private consumption expenditure makes up 60 percent of the economy. In the last few years, the investment part of the economy hasn’t gone anywhere and it is consumption which has been driving the economy. Now consumption is slowing down.

 

2) Why is consumption slowing down? Between April 2014 and March 2019, the retail loans of banks went up by 120 percent. Between April 2009 and March 2014, the five-year period before the period under consideration, the retail loans of banks had grown by 80 percent, on a much lower base.

Representational image. Reuters

Between April 2014 and March 2019, credit card outstanding went up by 204 percent whereas personal loans went up by 255 percent.

What this tells us is that borrowing financed a large part of consumption, over the last five years. Why did this happen? This happened primarily because the income in the last five years hasn’t gone up as much as it did in the period of five years before that.

The per capita income between April 2014 and March 2019 went up by 59 percent. It had gone up by 88 percent between April 2009 and March 2014. With this fall in the rate of growth of income, people borrowed more to consume and spend more.

 

3) Banks were not the only financial institutions giving retail loans. So, were the non-banking finance companies (NBFCs). Post-demonetisation in November 2016, banks had seen a huge increase in their deposits. Given that the banks were paying interest on these deposits, they needed to lend it out as well. They were not in a mood to lend to the industry, given the massive amount of bad loans they had accumulated on lending to industry. Bad loans are largely loans which haven’t been repaid in 90 days or more. What they did instead was started lending big time to the NBFCs.

 

Between March 2017 and March 2019, the banks lending to the NBFCs increased 64 percent to Rs 6.4 lakh crore. This easy lending by banks further encouraged the NBFCs to go easy on retail lending. Between March 2017 and March 2018, retail lending of the NBFCs jumped 39 percent to Rs 3.6 lakh crore.

 

4) The overall financial liabilities of the households went up by Rs 6.7 lakh crore in 2017-2018. This is a huge number.

 

5) In the recent past, several NBFCs have been in more than a spot of bother. This has led to the banks cutting down on their lending to the NBFCs. Between March 2019 and June 2019, bank lending to the NBFCs shrunk close to 1 percent. Banks are a major source of funds for the NBFCs. The Reserve Bank of India (RBI) data for the NBFCs for 2018-2019 is not currently available. But data put out by the credit bureau, CRIF High Mark, suggests that during 2018-2019, loans given by the NBFCs have fallen by 31 percent.

 

6) What about retail lending carried out by banks? Between March 2019 and June 2019, the retail lending carried out by banks increased by just 1.5 percent. If we look at the year-on-year growth in retail loans between June 2018 and June 2019, it remains strong at 16.6 percent. But the growth of just 1.5 percent between March and June this year tells us that the bulk of the growth in retail loans happened between June 2018 and March 2019 and things have slowed down since.

 

This tells us that people are becoming averse to the idea of taking on new loans to finance consumption. This was bound to happen at some point of time given that the income hasn’t been increasing at the same pace as it was in the past. Borrowing can finance only so much of consumption growth and in the process of economic growth.

 

7) There is another point that needs to be made here, which is not very obvious in the first place. In much of the western world, the thinking is that in an economic slowdown it is best to cut interest rates and let people borrow and spend more. This logic does not apply very well to countries like India. When it comes to a certain section of the population, they tend to consume more when interest rates are high. Take the elderly. When they earn a higher rate of interest on their deposits, they tend to consume more. Post-demonetisation interest rates have fallen and this clearly has had an impact on their consumption. What has not helped is that hospital and medicine inflation in 2018-2019, two figures very important for the elderly, were at 9.4 percent and 7.2 percent respectively.

 

8) A great success of the Narendra Modi government has been the ability to maintain low food inflation. The food inflation in 2018-2019 was just 0.14 percent. This basically means on the whole, food prices were flat. While this was good news for consumers, it wasn’t good news for farmers.

A major reason for flat food prices is that when it comes to many agricultural commodities, India as a country is producing more than it consumes. At the same, this excess produce is not being exported and hence, has led to stagnant food prices.

Stagnant food prices have meant flat incomes in large parts of rural India and this has now started to impact consumption.

Ultimately, consumption on its own cannot keep creating economic growth all the time. For that to happen, incomes need to keep going up at a good pace as well. For incomes to go up, there has to be economic activity and for that investment and industry need to progress.

(The writer is an economist and author of the Easy Money trilogy)

 

Read Part 1: Why Narendra Modi govt shouldn’t delay fiscal stimulus to revive struggling industries

Part 2: Country needs meaningful transition policies; simple demand and supply games won't do

Updated Date: Aug 14, 2019 15:23:27 IST

 

https://www.firstpost.com/business/tracking-indias-economic-slowdown-narendra-modi-govt-has-a-herculean-task-ahead-to-pep-up-growth-with-dying-private-investment-7163631.html

Edited August 16, 2019 by Stan AF

[Stan AF]

 

[Stan AF]

Auto industry may shed 500k jobs next quarter

Tier II-III companies with a turnover of less than Rs 400 crore are bleeding the most.

By Prachi Verma, ET Bureau | Updated: Aug 18, 2019, 06.33 AM IST

NEW DELHI: India’s $57-billion auto components industry is expected to face more jobs losses over the next quarter due to the ripple down effect of slumping automobile sales. Front-end sales jobs and those related to technical, painting, welding, casting, production technology and services are primarily at risk, industry players said.

“The vehicle industry is witnessing de-growth, resulting in 100,000 job losses in the component sector over the last few months. Should this trend persist for another 3-4 months, it could lead to 1 million job losses,” Vinnie Mehta, director generalm Automotive Components Manufacturers Association of India (ACMA), told ET.

Recruitment firms Xpheno and TeamLease have pegged the job losses at more than 500,000 in the coming quarter. “The job cuts are happening around the major hubs, and by at least 10% in each of the companies,” said Rituparna Chakraborty, co-founder, TeamLease Services. The downturn in the auto sector is expected to last anywhere between six and nine months, she said.

 

 

Tier II-III companies with a turnover of less than Rs 400 crore are bleeding the most. Around 5 million are employed in the sector, which exports components worth $15 billion. “Contractual employees are being laid off after unskilled & semi-skilled employees in the auto ancillary industry,” said Mehta.

The slowdown started during the festival season in September last year. “About 15% reduction in man-hours, including actual lay-offs and reduction in work days/hours, has taken place since September 2018 till date,” said Ram Venkataramani, president, ACMA and managing director at Amalgamations Group, an auto ancillary player. Another 15%, roughly 750,000 workers, may be forced to quit over the next quarter or so, he said. Amalgamations Group has laid off about 200 across functions and levels.

 

Other companies, too, have started taking protective measures. For instance, automobile components manufacturer Minda IndustriesLtd has put a freeze on fresh and replacement hiring. It has also reduced inventory and operational costs. “We are not touching the people in the company just yet,” said Nirmal Minda, chairman, Minda Industries, adding that contract workers may be the first to let go in case the situation worsens. The company has more than 20,000 employees, of which 5,000 are contract workers.

Ajay Kumar, HR head at tyre maker Continental India, said, “We closely monitor our production and process cost. Hiring is being looked at carefully as a matter of process discipline but we are continuing to hire.”

 

“The auto ancillaries sector would definitely see some impact; Apollo Tyres has been able to keep itself above troubled waters till now,” said Satish Sharma, president, Asia Pacific, Middle East and Africa, Apollo Tyres.

Bosch, Ceat, Shriram Pistons and Rings, and Lumax Industries did not respond to ET’s queries on the employment scenario.

 

https://m.economictimes.com/industry/auto/auto-news/auto-industry-may-shed-500k-jobs-next-quarter/articleshow/70709114.cms

 

Edited August 18, 2019 by Stan AF

[Stan AF]

View: Its the start of a structural problem, not a temporary cyclical one

Our manufacturing is jammed at a long-term low of 15% of GDP. Domestic demand has also slowed down.

By ET CONTRIBUTORS | Updated: Aug 19, 2019, 06.20 AM

 

BCCL

Having ignored education for decades, we have millions of young people without the skills for tomorrow’s employment.

By Omkar Goswami

After going through three successive quarters of slowdown in India, and with the prospects of that continuing for some more, every thinking economist is asking one question: is this cyclical or structural?

In other words, is it just a series of bad quarters that will right itself soon enough with adequate monetary and credit stimulus? Or is it something more serious one that is beyond the ken of repo rate-led monetary interventions?

Whatever I have learnt over four decades of economics, and all that I see in boardrooms of companies spanning different industries, suggest that we may have got into a structural impasse. Getting out of it will need interventions that go well beyond the realms of reducing the repo rate.

 

Make More in India
Let’s start with manufacturing. At 15%, India’s share of manufacturing to GDP has remained persistently flat over a long period. Compare that with Malaysia at 22%, South Korea and Thailand at 27%, China at 29% over a much higher GDP, and even Bangladesh at 17%. It seems that ‘Made in India’ is about commissioning dreadful statues of gear-cogged lions at key cross-roads of our major cities. It has done nothing to increase manufacturing in our GDP.

There’s worse. Not only has there been no rise in the share of manufacturing, but it has also shrunk across key sectors. Over the last six months up to May 2019, textiles de-grew by 1% amonth, electrical equipment didn’t grow at all, rubber and plastic products slumped by over 3%, the output of fabricated metals as well as paper crashed by over 10% a month, and that of motor vehicles plummeted by over 5% a month. Matters have worsened in June 2019. The index of industrial production hit a four-month low with 15 of the 23 industry groups showing negative growth.

Next question: how much are we investing to create future income? Today, our gross fixed capital formation is between 31% and 28% of GDP, depending on whether it is measured in constant or current prices. There being no significant productivity increases, these rates are wholly insufficient to sustain consistent GDP growth in the region of 7.5%, let aside 8%. Compared to our capital formation of around 31% of GDP, it was over 34% in Indonesia, 44% in China, and over 31% and rising in Bangladesh. In the last two years, I have seen no additional investment proposals in any boardroom.

Now for some longer-term issues. In the last 50 years, no economically significant nation has grown rapidly without investing in the quality of its workforce — something that becomes supremely important in an era of rapid computerisation, networking and artificial intelligence. Where do we stand here? Awfully.

In 2011, the literacy rate for Indians of 18-24 years was 86%. Compare that with 97% for China in its period of highest growth, 99% for Indonesia, and 98% for Malaysia and Thailand. It is worse for women of same age group: 82% for India, 95% for China, 99% for Indonesia, and 98% for Malaysia as well as Thailand. No Southeast Asianand East Asian country has discriminated against girls in education.

We have, and continue to do so. Given this educational disparity, it isn’t surprising that India has a very low share of women in the workforce —which itself is fast declining over time. In 2005, women accounted for over 26% of the workforce. This has steadily reduced to 22% in 2018. In comparison, the share in Bangladesh in 2018 was over 30%, China 44%; Indonesia 39%, Malaysia 38%, and Thailand above 45%.

As You Sew, So Shall You Rip
On to exports. Between April 2011and June 2019, our exports have been pretty much flat — oscillating around $25 billion a month. China, with five times our GDP, exports almost eight times as much. South Korea, at 60% of our GDP, exports twice as much. Malaysia and Thailand, with less than a fifth of our GDP, export over three-quarters as much as we do. Simply put, notwithstanding IT, we have failed as an exporting nation. A persistently overvalued real exchange rate has also played its role.

The scenario is depressing. Our manufacturing is jammed at a longterm low of 15% of GDP and going through a grim phase. Domestic demand has seriously slowed down.

There is no vent through greater exports. Having ignored education for decades, we have millions of young people without the skills for tomorrow’s employment. We are persistently poor in employing women. To me, it looks like the beginning of a serious structural problem, not a temporary cyclical one.

It requires serious kick-starting with a severely constrained exchequer. So, it must go back to banking, and creating sufficient liquidity with affordable credit flows to key sectors. I can think of four: low-cost housing, roads and highways, rural infrastructure, and textiles. The first three have high employment potential while creating demand for core industries, and the fourth creates an essential product for the people. Each of these can get a fillip through specific credit flows catalysed by accommodative policies of the Reserve Bank of India.
 

These will not solve the longer-term structural problem, but may mitigate some of it, while helping a cyclical uptick. Having said that, I fear that the days of 7% growth are over. We may have to now live with 6% — heaven forbids, perhaps even lower. As you sow…

The writer is chairman, Corporate and Economic Research Group (CERG) Advisory

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) 

 

https://m.economictimes.com/news/economy/indicators/view-its-the-start-of-a-structural-problem-not-a-temporary-cyclical-one/articleshow/70728021.cms

Edited August 19, 2019 by Stan AF

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Quote

“Do not step out of home on Thursday unless it is necessary " Maharashtra Navnirman Sena (MNS)

Saw this on twitter.. and some news about Raj Thackerey being summoned by ED. 

 

@G_B_

Effects on Mah politics??

 

Edited August 19, 2019 by diga

[Stan AF]

Raghuram Rajan: Economic slowdown ‘very worrisome’, reforms needed to boost ailing sectors

Raghuram Rajan said the government's top priority should be fixing the problems in power and non-banking financial sectors (NBFCs).

By Express Web Desk |New Delhi | Updated: August 20, 2019 7:58:23 am

  Former RBI governor Raghuram Rajan (Express photo by Nirmal Harindran)

Calling the recent slowdown in the economy “very worrisome”, former RBI governor Raghuram Rajan has said the government needed to come out with a new set of reforms to revitalise the ailing sectors. Rajan said the government’s top priority should be fixing the problems in power and non-banking financial sectors (NBFCs).

 

“We need a fresh set of reforms informed by view on what we want India to be and I would love for that view to be articulated at the very top (that) here is the kind of economy that we want. One-off programs here and there don’t amount to a comprehensive reform agenda for the economy,” Rajan told CNBC TV18.

The economy is fast losing its growth momentum as a result of a dip in consumption demand and slide in investment activity. Non-banking financial companies (NBFCs) are facing severe liquidity crunch in the wake of IL&FS crisis.

“What we really need is an understanding of how we are going to propel this country by the two or three percentage points greater growth that it needs and that needs fixing the immediate problems such as in the power sector, such as in the non-bank financial sector and those need to be done yesterday, not in the next six months, it is very important that those be tackled immediately,” Rajan said.

 

Rajan said the government cannot rely on sops and advocated for a new set of reforms to increase private sector investment.

“We need a new set of reforms, which energise the private sector to invest. Sops, stimulus of one kind or the other are not going to be that useful in the longer-term especially given the very tight fiscal situation that we have. Instead, bold reforms, well thought of, not jumping off the cliff, but really seriously thought out reforms in a variety of areas which energise the Indian people, energise the Indian markets and energise Indian business,” he said.

Rajan also drew attention to former chief economic advisor Arvind Subramanian’s revelations that GDP growth was overestimated by 2.5 per cent during 2011-12 and 2016-17.

“I also think that we should pay attention to some of the arguments made by the former chief economist Arvind Subramanian that in fact we may be overestimating growth with some of the new GDP data and I would suggest – I have been saying this for some time – we need fresh look from an independent group of experts at the way we compute GDP and make sure that we are not in a sense having GDP numbers that mislead and cause the wrong kinds of policy actions,” he said.

The recent crisis in the auto sector has resulted in thousands of job losses, while the fast-moving consumer goods (FMCG) companies have reported a decline in volume growth

 

https://indianexpress.com/article/business/economy/economic-slowdown-very-worrisome-reforms-needed-to-boost-ailing-sectors-raghuram-rajan-5917936/

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All is not well is the byword as Shaktikanta gives India 'Panglossian'

A mood of doom and gloom will not help anyone at this point, Shaktikanta Das said.

The share of manufacturing in India's GDP, at 15%, has long remained distressingly low for a country that aims to be among global industrial heavyweights. Auto, the sector that has the lion's share in the country's manufacturing basket, is seriously sputtering.

July auto sales came in at a 20-year low, SIAM data showed. At the current rate, total annual passenger car sales for this fiscal could fall to sales levels last seen in 2014-15.

The financial sector is still caught in the deep mess that started with the unravelling of IL&FS. The pockets of the common Indian — including the farmer — are empty, with the result that consumption, which is the mainstay of the country's GDP, is firmly stuck in the slow lane.

Investment — both private and corporate — continues to be pedestrian and is likely to remain so, cutting out the last hope for a quick, significant turnaround. Companies have delayed investment because of widespread business uncertainty, while the government can't afford to double down on its part owing to fears over a spike in deficit.

The road back to growth
The governor acknowledged all these bottlenecks — he admitted that things like the NBFC crisis and the resultant lack of liquidity for critical sectors do affect businesses as well as the economy at large.
 

RBI is closely monitoring NBFCs and housing finance companies to make sure no other collapses happen, Das said.

He put into words all of RBI's concerns over the steady fall in growth; he said a revival in growth was now the top priority that's keeping every policymaker busy.

Das sought to reassure businesses by saying liquidity will not be a deterrent for growth. RBI's endeavour is to ensure enough liquidity in the system so that the productive needs of the economy are met, he said.

So, from where does RBI see the economy getting the push it needs so badly? "Not just from monetary policy but also through transmission. So our expectation is that banks should move faster on rate cut transmission," he said.

 

https://m.economictimes.com/news/economy/policy/all-is-not-well-is-the-byword-as-shaktikanta-gives-india-panglossian/articleshow/70734905.cms

 

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