The automobile industry serves as a fair proxy for India’s economic growth. Automobile sales have been in a downward spiral since last September, reflecting weak consumer demand. The Indian economy has also been decelerating, quarter upon quarter, over the period in question; it expanded by 6.6% in the quarter ended December, and 5.8% in the final three months of fiscal 2018-19. Hopes of a quick reversal of the trend appear to have weakened as well. The Automotive Component Manufacturers Association of India (ACMA) has warned that a prolonged slowdown could lead to a million job losses in the auto ancillary industry. This is too large a number not to worry about.

Domestic makers of auto parts employ nearly 5 million people, about two-thirds of whom are contractual workers. A demand slump leaves them particularly vulnerable. That India is undergoing a broad-based slowdown is undeniable, and needs urgent measures taken to effect a turnaround.

The trouble in the auto sector is a result of a combination of sagging demand and policy uncertainty. The government’s insistence on a market shift towards electric vehicles, in its eagerness to cut carbon emissions, appears to have shaken automakers, who have had to make chunky investments to adopt Bharat Stage VI emission norms. At another level, the Centre’s stance has prompted clued-in car buyers to defer purchases until the policy fog clears. While a reduction in interest rates and taxes could offer a reprieve to the sector, only a wider economic revival may be able to save those jobs said to be at stake.

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