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Economic Slowdown and a 5 Trillion Economy and its Effect On Stock Markets

Economic Slowdown effects

Undoubtedly stock markets are most affected by economic weather of a country. There are different economic Events and data to understand that affect the economy. Let’s understand the economic slowdown and its effects.

Here is a primitive question floating in the universe:  Who came into existence first; an egg or a hen.

This can be co-related to Indian economy also.  The slow down in the Indian economy is triggered by declining auto sales or decline in auto sales is due to the slow down in Indian economy difficult to find an answer. But it is obvious that the Indian economy is in a medium-term slowdown.  Automobile manufacturers are cutting their production to deal with the piling up of the inventories. The workforce in this sector is either laid off or retrenched. Dealers are shutting the outlets as there are few buyers of the products.  A total gloom is prevalent in auto sector of India.

China Factor & Auto Sector

Every business has its own risk; some risks are inherent and some risks are noninherent. Most of the manufacturing sectors in India have a noninherent risk and that risk is CHINA FACTOR.  But the Indian auto sector is insulated to CHINA FACTOR.  One may have plenty of white goods, consumers electronics and electricals, personal care products and many more articles which are made in China and sold in India. It is difficult to find a China-made motor car, a truck a scooter/motorcycle in Indian Auto sector. Hence the CHINA FACTOR distinguish auto sector with the manufacturing sector.`

More About Auto Sector

Indian automobile sector is the largest contributor to the Indian GDP.  The auto sector is the largest employment generator. Auto sector is a big foreign exchange earner. Auto sector is perhaps the large tax contributor(direct and indirect) to the exchequer.  Auto sector is the big source of revenue to state governments by way of registration of vehicles and road taxes. The auto sector is a big source of revenue to the insurance sector. So the auto sector in India is of great prominence which should not be neglected or overlooked for long time.

Amid slow down, the government is pushing the technology transformation in this sector; international combustion to electric.  This move has increased the worries of auto manufacturers.  A huge investment is required for the technology transformation and where these investments will come from.

Manufacturers are demanding a prudent GST structure, reduction in insurance premiums, rationalize the road tax and vehicle registration fees. Non Availability of finance is also adding fuel to the aggravating situation.  Despite repeated representations by different auto organizations, business stalwarts the government is least heeding.

In the meanwhile Indian economy has slipped to 7th  from 5th  in the world ranking and we are talking of a 5 trillion economy.  If the Indian economy has to be of 5 trillion and global ranking improvement endeavour for evacuating the economy from slowdown and bring the economy back to high growth path.

We all know Modi Govt has many agendas beside economic growth and our Finance Minister will definitely take a good approach in tackling this big issue in time to come.

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