Putting the pedal to the medal

GS-III: Putting the pedal to the medal

News

The automobile industry is cyclical. It is also a lead indicator for economic growth. And it has been experiencing signs of a slowdown. The decline began in the last quarter of the calendar year 2018 and intensified with the passage of every month in 2019.

Background

Though the industry goes through cycles of ups and downs the current slowdown is something to worry about seriously. The current downturn is like nothing that the industry has seen in a long, time in terms of depth, scale, and character.

Commercial vehicles – Revision in axle-load norms

In 2018, the government revised axle-load norms (for the first time since 1983) for cargo carriers by between 12% and 25%. It was aimed to legalize overloading and help reduce freight costs for both consignors and consignees.
By applying the higher cargo rules to all trucks on the roads, government raised existing carrying capacity and forced per-tonne freight rates down.
This occurred at a time when carrying capacity was increasing due to the introduction of GST.

BS-VI

Vehicle manufacturer’s practice of clogging the pipeline by over-producing vehicles without care for demand, and dumping them on dealers to sell became a painful issue now.
Because of the approaching deadline for the transition to BS-VI norms from April 1, 2020, dealers are saddled with the inventory of BS-IV vehicles that they need to clear out before the deadline.
Manufacturers are unable to plan their production schedules for BS-VI vehicles.

Way Forward

The government should reduce GST on the automobile industry from 28% to 18% as per the demand of the industry but not for all the vehicles with manufacturers and dealers.

Source: The Hindu

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