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'The babus in Delhi are not able to understand the pain industry is facing.'
The automobile sector accounts for over 7.1% of India's overall GDP, and nearly 22% of the country's manufacturing GDP.
As per the Government of India's Invest India portal, the auto sector employs 35 million people. Reuters reported in August that over 350,000 jobs were lost from April in the auto sector.
So how grave is the situation in the wake of the pandemic?
K Ilango, former chairman, CII, Coimbatore region, and former president of Coimbatore District Small Industries Association, paints the real picture in an interview with Shobha Warrier/Rediff.com.
"If you ask me whether the government has come out with the right policies for the next phase, I don't think so. They are skewed in the way they are thinking, skewed in their policies," says Ilango, below, in the first of a two-part interview.
Though there was 0% sales of vehicles in April and a drop of 51% in June, it is reported that in August there is an increase in the sales of small cars and two-wheelers. Is this good news for the auto sector?
Yes, small cars and two-wheelers are doing well. But commercial vehicles are still badly affected, especially the medium and heavy commercial vehicles, and I belong to that segment.
Because buses are still not plying, and inter-state and inter-district transport is also in limbo, commercial vehicles are doing very badly.
Companies are working only with 25% of their capacity.
Do you see any silver lining though there was an unprecedented contraction of the economy?
I won't say that there are no silver linings in the overall economy.
If you look at the agriculture sector or the rural economy in general, they are doing well. And that is the reason why the small cars and two-wheelers sales are up.
People are buying small cars and two-wheelers because public transport is not fully operating yet, and they prefer their own vehicle for the fear of getting infected.
This is also more to do with the pent-up demand and nothing more than that.
I am of the opinion that this kind of growth we see in small cars and two-wheelers cannot be sustainable.
If you look at across all sectors, things are not so rosy.
Sectors like construction, real estate, tourism, aviation, etc are totally in the doldrums.
When so many sectors are not functioning at all, the overall economy cannot come back to normal.
The July GST collection was around 90% of the previous year's. But you cannot say we are on a high growth path.
I anticipate if normalcy comes back by the end of December, things would be better across the board from January onwards.
All the unevenness we see now will get evened out then.
I will not say that there is no light at the end of the tunnel.
The GDP growth was -23.9% in the last quarter and still you expect things to be normal by December end?
The -23.9% growth was for the last quarter. It may come to -10% in this quarter.
If we can come to even close to 0% in the third quarter, according to me, it is good.
I feel we may be able to see positive growth in the fourth quarter.
And if we can see positive growth in the fourth quarter of this year, we should be happy under the circumstances.
Compared to many other countries, India is the worst affected. Do you think it was because we were on a downward path even before the pandemic struck?
True, there was a slowdown but we were never in the negative. The economy slowing down definitely had a great impact after the pandemic; we cannot wish it away.
India has the capability to grow at 8%, and India needs to grow at 8%.
We may come back to the earlier 4% to 4.5%, but beyond that, it all depends on the policies of the government.
If you ask me whether the government has come out with the right policies for the next phase, I don't think so. They are skewed in the way they are thinking, skewed in their policies...
Do you feel it is because the government has not accepted that there is a problem, and that is why the policies are not right?
Only towards the end of last year that they accepted there were problems.
Then the pandemic came, and things went out of hand.
Today, they are still in the pandemic fighting mode, and they are not looking for a long-term growth.
All their policies, even now, are myopic.
The babus still want to squeeze the industry and tighten things.
For example, apart from the pandemic issues like we are facing including the interest waiver and extending the moratorium, they have not come out with any long-term solutions.
In fact, the government is not doing enough on even the pandemic-related issues.
The babus sitting in Delhi are not able to understand the actual pain industry is facing.
Till they understand the reality, the pain will continue and growth will not happen.
The government seems to be very short-sighted on the current situation, and don't even understand what the auto sector needs.
Many of the sectors have not even opened up yet. In fact, they are sounding the death knell of many businesses.
Imagine, the finance minister finally accepts that two-wheelers are not luxury items and the 28% GST is not correct.
This was what we have been saying for three years!
To understand how bureaucratic the government has become, you have to only see the last Budget.
They came out with something called TCS -- tax collection at source -- for goods. This was not there earlier.
If you have a turnover of Rs 10 crores (Rs 100 million) and supply goods to anybody, you have to collect TCS at 0.1% and remit to the government.
For example, if I am supplying goods to Ashok Leyland or TVS, I have to collect TCS at 0.1% from them and pay the government.
This is going to be there from October 1, 2020.
What are they going to achieve by introducing a new bureaucratic hurdle when everybody is trying to get back on their feet?
I am sure the babus are having a field day introducing one more tax and one more form.
What will they achieve except slowing everything down?
A Rs 10 crore company today is a small and medium one.
I would say they are still insensitive to the problems businesses face.
It is decisions like these that are affecting the demand, and slowing everything down.