Demonetisation has its impact on various sectors and the latest victim is the automobile industry. Indian Automobile sales fell the most in 16 years after the announcement of Prime minister Narendra Modi to scrap old Rs 500 and Rs 1000 notes. The cash crunch situation forced the majority of consumers to postpone their plans for the purchase of cars motorcycles and trucks.
According to the data released by Society of Indian Automobile Manufacturers (SIAM) in New Delhi, automobiles sales slumped by 19percent and recorded to 1.2 million units in December the biggest drop if you compare the same month in 2000. Passenger vehicles sales fell by 1.4 percent while scooters and motorcycles that form the bulk of rural household also registered 22 percent fall in the biggest monthly contraction.
Vishnu Mathur Director General of SIAM told that the sector witnessed effects of demonetization although it may be considered as a temporary phase. However, he pointed that for the upcoming budget in February, proper measures has to be announced to increase the currency in circulation. He further asserted that the fall in auto sales, is clear indication of the failure of demonetization and that is slowing India's economy. He added Modi led government should come up with Sops or else industry cannot meet the 12% sales growth target it has set earlier.
Gross domestic product (GDPis expected to expand 6.8% this fiscal year which is 7.7% lower than expected before November 8 according to survey made by a panel of 18 economists in Bloomberg. The inactive consumer demand will add pressure on the Modi-led government to implement measures in the budget to bring the sales back on track to facilitate growth.Statistics Ministry has earlier forecasted the Gross domestic product growth to slow down to 7.1 percent without considering demonetisation.
Power minister Piyush goyal last week has said that scrapping of high-value notes boosts revenue collection which in turn may lower taxes imposed by the government.The Nikkei Purchasing Managers' Index flagged December withdrawals in both manufacturing and the services sector, that makes up around 60% of the economy. A private gauge of consumer sentiment has plunged since mid-December and informal evidence suggest job losses in India's vast informal sector that employ more than 90% of Indian workers. beyond 90% of Indian laborers.