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India's decade of wheeled deities (updated)

In the period 2002-03 to 2008-09 the average annual growth rate in sales for the basic four categories of vehicles - commercial vehicles (lorries/trucks and buses), three-wheeled vehicles (that includes autorickshaws, which are short-distance transport in almost every Indian town and city), two-wheeled vehicles (that includes motorcycles, scooters and mopeds), and cars - has become the stuff of manufacturing legend. Yearly sales growth of 17.46% for commercial vehicles, 13.51% for three-wheeled vehicles, 25.69% for cars, and 10.97% for two-wheeled vehicles have turned India into a market which has the potential to become a US$145 billion auto bazaar by 2016, say the Automotive Component Manufacturers Association (ACMA), the Confederation of Indian Industry (CII) and the Society of Indian Automobile Manufacturers (SIAM) who have jointly organised the expo.

These are the numbers that have caused every single major automaker from anywhere in the world to descend on New Delhi. Ten years ago, in 1999-2000, auto factories in India had made 574,000 cars - in 2008-09 the annual figure is 1,620,000. In ten years the number of commercial vehicles built has more than doubled, from 299,000 to 635,000. In ten years the number of two-wheelers built has more than doubled, from 3,778,000 to 8,394,000. "Why India?" asks the promotional literature of the Auto Expo, and the organisers (supported by the Government of India and representing too the interests of the global auto giants) smugly provide the answers: "India is the second largest two-wheeler market in the world", "Fourth largest commercial vehicle market in the world", "Eleventh largest passenger car market in the world, and expected to be the seventh largest by 2016".

There are twin reasons for the rise of the Indian automobile bazaar. First, since 2006, globally the automobile industry has suffered what it plaintively calls "severe demand shock" on account of the economic slowdown and credit crunch in western markets (OECD + North America). The drop in demand for 2008 and 2009 has been 38% in the US, 18% in Europe and 13% in Japan. In contrast the Indian passenger vehicle market maintained its demand during 2008-09 and is rising sharply for 2009-10. This is why most of the big names in the global automobile industry (GM, Toyota, Ford, Hyundai, Suzuki, Honda, Skoda, Volvo, Mercedes Benz, BMW, Volkswagen) are planning what industry analysts call "significant capacity build-up for the Indian markets".

Second, the demand for passenger vehicles from India's "Tier 2" and "Tier 3" - those with populations of under 1 million and under 0.5 million - cities and towns continues to remain strong despite the impact of a failed monsoon in 2009. Where has the spending money come from? Till now, poor monsoons have meant there is less disposable income in the hands of the farming community and the rural population which directly depends on farming or on agri-business. "Industry estimates suggest that approximately 60% of the rural economy now depends on non-agricultural income such as trading, remittances from cities, employment in the manufacturing sector etc," states a sector analysis by ICRA, a well-known Indian credit rating agency. "That apart, substantial increase in crop prices, which were higher over the past three years, has also resulted in higher disposable income. Additionally, the increase in land prices across the country, and the implementation of the Sixth Pay Commission has collectively helped in supporting the growth in the rural and semi-urban cities/tier III cities."

There are a host of difficulties present in the ICRA view, which represents the large and influential group concerned with the financing both of the production of automobiles and their purchase by this allegedly growing and newly enriched middle class. (To explain a point, the Sixth Pay Commission is a set of instructions concerning the salaries payable to government employees, and these were revised upwards in many grades and categories in 2009.) From 2008 onwards, the consumer durables and food processing industries have regularly claimed that rural Indian populations are earning more than ever before thanks to a much wider basket of activities than merely agriculture.

"Urban consumers may be back in the market, but the real action will continue to happen in the countryside where the market grew three times faster than in urban areas last year with the likes of Maruti Suzuki, Hero Honda and Bharti Airtel [a telecom company] having a harvest feast," exclaimed one of India's mainline (and unabashedly mercantilist) business dailies. The Confederation of Indian Industry (CII), which is India's largest and most powerful industry association, has put out a host of studies to show that the rural consumer market grew 25% in 2008 when demand in urban areas slowed due to global recession, and that it is expected to reach US$425 billion in 2010-11 with 720-790 million customers. "That will be double the 2004-05 market size of US$220 billion," claims a study prepared by Technopak, a consulting firm to the Confederation. "The rural consumer is upgrading to branded products thanks to extensive media penetration in villages," the consultant has said. "Tweaking the marketing mix in price conscious rural markets led to improved sales for companies like Adidas and Reebok, which saw sales go up 50% by reducing prices in rural areas. Philips launched a low-cost stove in rural markets and LG's customised TV (to pick up low density signals) sold 100,000 models in the first year."

These are the views and goals being circulated amongst a group of companies (both Indian and non-Indian), within some central government ministries and departments, and by a large number of financial sector firms and consulting agencies. They have little to do with the realities of life in India's 600 districts, a majority of which are rural and whose inhabitants have been struggling to deal with the food price inflation of the last two years. Since 2000 - which the industry proclaims to be the start of the turnaround decade for India's industry and manufacturing - there have been several comprehensive and immensely significant social sector surveys and programmes conducted all over the country. These have dealt with the incidence of poverty and under-nutrition, with access to and quality of basic healthcare (including maternal and infant health), with access to education and ensuring that children who go to school stay in school, with the provisioning of a rural employment guarantee programme the scale of which dwarfs anything similar in the history of independent India, with an assessment of the farming community (by far the largest sector in terms of employment, and interestingly whose wage rate growth is not far behind that of the wage rate growth of unorganised industry), and an assessment of the huge numbers of unorganised labour.

The triumphant notes being sounded by the automobile czars in New Delhi ignore entirely India's worryingly uneven and imbalanced sectoral distribution of 'growth'. What the comprador media calls "the India growth story" has only marginally touched agriculture, with evidence that over a prolonged period starting in the early 1990s, the per capita output of foodgrains was on the decline for the first time in the country's post-Independence history, as economist C P Chandrasekhar has pointed out. Around 55 per cent of the increment in GDP over the last decade has come from the services sector, and just less than half of that contribution was due to an expansion of organised services, public administration and defence. "Since unorganised services consist largely of low-paid work accepted for lack of alternative employment opportunities, the burgeoning of this sector as evidenced by the statistics should be an indicator of growing distress rather than progress and development," warned Chandrasekhar.

The oligarchy gathered in New Delhi have paid no heed to any other evidence. From western India (where I live and work) the views are worse than alarming. Urban infrastructure almost invariably means the construction of new roads and the widening of existing roads - water, sanitation and health are all accorded low priority. 'Development' in the Tier 2 and Tier 3 cities is a term that has been distorted to mean giant high-rise residential housing, a profusion of shopping malls and 'multiplexes', and acres of wide new roads. Car ownership has become the most important denominator of social inclusion which in the richer wards of Mumbai, Bangalore, Hyderabad and New Delhi, is characterised by the rising numbers of luxury cars on the roads: BMW, Mercedes Benz, Bentley, Porsche, Lexus, Ferrari, Audi and a variety of monstrous SUVs.

This gigantic exercise in furthering the cult of the car in India is underwritten by the Government of India. The industry has as its guidebook the 'Automotive Mission Plan 2006-2016: A Mission for Development of Indian Automotive Industry'. This is a policy document from India's Ministry of Heavy Industries and Public Enterprises which says, clearly and unambiguously in its 'vision' statement: "To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016." Nowhere in this extraordinary handbook of consumption is there any mention of the anticipated impact of this industry's growth on agricultural ecosystems in rural India, where in this same decade of the automobile tens of thousands of acres of farmland has been acquired by state governments for widening roads and building new highways. The links between India's growing automotive religion and diminishing farmland, catastrophic urban congestion, a misallocation of scarce financial and technical resources and misshapen social values have been clear to our social scientists and civil society. Barely a month after the Copenhagen conference, India's ruling elites are making a blunt statement about where their priorities lie.

Editorial Notes: Photo credit: flickr/Shamih (iZZo)

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