Bountiful Monsoon & Festive Season Sustaining Hope

Dear friends,

The year so far has been nothing to write home about auto market. It needs no reiteration that the auto market has been passing through the turbulent time for over 18 months. All hopes of turnaround have been belied month after month.

The sluggish economic environment did not help either.  The slowdown in GDP growth, stubborn inflation, abnormally high interest rates, volatility in fuel prices, weakening rupee and widening current account deficit (CAD) have been making headlines with alarming regularity for long time now so much so that any adverse development does not spring any surprise or shock.

The downbeat sentiment continues unabated. Inflation as measured by the wholesale price index (WPI), quickened to 6.1% in August from 5.79% in July on rising food prices, putting a damper on any hope of Repo Rate cut by RBI in its second-quarter monetary policy on 29th October.

Capping the sombre saga is the recent report that India’s factory output growth slowed to 0.6% in August after expanding 2.75% in the previous month,  suggesting that economic recovery remains tenuous. Even against the backdrop of weak economic growth, some experts expect the central bank to hike the repo rate to tame inflation. International Monetary Fund (IMF) has warned that in a number of economies, including Brazil, India and Indonesia, more monetary tightening may well be needed to address inflationary pressure.

Further, IMF has, in its World Economic Outlook report released recently, forecast that India’s economic growth would fall to 4.25% in the year to 31st March 2014, saying that the economy would continue to underperform because of regulatory, infrastructural and financing issues. IMF said robust farm production will be offset by an anaemic performance by the manufacturing and services sectors, and that the current monetary tightening will crimp domestic demand.

The Asian Development Bank on October 2 slashed its growth forecast for India to 4.7% for 2013-14 from 6% earlier. These projections are less than the government’s estimate of gross domestic product (GDP) growth of 5-5.5%. 

However, after a series of gloomy reports, the developments of late are comforting and music to our ears. 

The rain god has been bountiful with monsoon delivering 6% more rains than normal.  What is gratifying is that the monsoon has been good both in quantity and coverage, strengthening prospects of a bumper farm output that could boost farmers' earnings and fuel robust rural demand.

The effect of good monsoon has already started showing up with two-wheeler sales gathering momentum again for the last three months. Hopefully, the pick-up in two-wheeler sales is a bellwether and an indicator that the economy has bottomed out. Therefore, the time ahead looks interesting for the auto market.

The second major reason for encouragement is that the factory output looks like climbing up. In spite of tepid IIP number for August, the positive growth in July and August, albeit marginally, after two months of negative growth is welcome news nonetheless.

Thirdly, the exports are beginning to display resurgence and buoyancy.  India's exports grew 11.15% in September and imports declined 18.1%. India’s trade deficit contracted to a 30-month low of $6.7 billion in September, alleviating concerns over ballooning Current Account Deficit (CAD). The third consecutive double digit growth in exports in September is a good sign for Indian economy and will further give a fillip to export growth in the second half, as exports may clock even better result in the second half of the current fiscal touching USD 350 billion.

Fourthly, crude oil prices are stabilizing in the international market and the rupee is on a comeback trail slowly but surely. The rupee is expected to strengthen further on the back of narrowing trade gap and subsiding CAD.

Fifthly and more importantly, the long festive season has just begun with Navratras and Durga Puja. During this auspicious period, the people normally go for big-ticket spending. The fact that the farm sector is expected to grow at over 5% is an icing on the cake. The rural demand is going to have ripple effect and the consumer demand is likely to revive, which, coupled with some pick-up in investment, could bring about a turnaround hopefully. 

I am sure, while my fellow dealers are having a lot of fun and gaiety during the festivities, the pick-up in sales is going to add fervour to their merriment.

As regards, FADA’s activities, I must say that our plate is full. After having successfully concluded FADA’s 49th Annual Session on 6th September 2013, we have got down in right earnest to review the progress of four major activities in hand. 

I mentioned in my previous columns that FADA has commissioned F&S to do a study on benchmarking of practices of OEMs in regard to retail of passenger vehicles in India. I am happy to inform that F&S made a presentation on their interim findings. Though the survey is not complete, very interesting findings have emerged from the small sample analysed so far. The survey has thrown up not only some innovating ideas but has also brought out disparities in retail practices. The study is likely to be completed in December/January and the final report will be presented at the Auto Summit 2014.

Preparations for FADA’s mega biennial event, i.e. Auto Summit 2014, scheduled for 7th & 8th February 2014, are making steady headway. The Auto Summit Committee met in Delhi recently to review the progress and to give a shape to the 2-day programme, including organisational aspects and logistics. It gives me a sense of satisfaction that the preparations are on track.

Needless to say, Auto Summit 2014 that will bring together various stakeholders on a common platform, is a unique opportunity for my fellow dealers and others connected with automotive business to enrich their experiences and to get an insight into the current & emerging automotive scenario.

The Auto Summit 2014, coinciding with 50th Anniversary of FADA, is also an occasion to meet your fellow dealers from within India and across globe and the OEMs. It is an occasion to unwind, celebrate and build relations.

I would, therefore, appeal to my fellow dealers and allied business partners to register for the Auto Summit 2014 in large numbers, if they have not already done so.

The 5th edition of Automotive Dealership Excellence Awards for the year 2013 (ADEA 2013), which will form an integral part of the progamme of Auto Summit 2014, has been kicked off. Nominations for various categories of awards are open. The awards recognise and reward not only the excellence in different areas of dealership management but also the outstanding work done by the automotive dealers in CSR, social welfare and community service. The idea underlying awards for Green Initiative, Safety Initiative and CSR Initiative is to secure recognition and goodwill of the society, as no business can thrive and grow in vacuum. Please participate in these awards overwhelmingly so that they truly represent excellence in auto retail and social work.

As mentioned in my previous column, FADA has entered the 50th year of its formation. We shall be celebrating the Silver Jubilee of FADA by organising events & activities at various places in the country throughout the year. I shall welcome your ideas and suggestions in this regard.

Wishing You All A Very Happy & Prosperous Diwali,

Yours sincerely,

Mohan Himasingka

 

 

 

 

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