Slowdown snippets

Big discounts and price cuts, following the 4% reduction in excise duty, failed to accelerate sagging automobile sales in the domestic market with major companies reporting double digit declines in sales in December. Sales of Maruti slipped 11% —third month in a row —to 52,029 units against 58,401 units in the same month last year. Alarmingly, this decline comes even after the addition of a new compact model A-Star. General Motors fared worse as its sales fell 36% in December at 4,041 units against 6,309 units in the same month last year. The story was no better on two-wheeler front, with the top two players— Hero Honda and Bajaj Auto— reporting a double-digit fall. Hero Honda said sales stood at 2.15 lakh units against 2.4 lakh units in December last year, a fall of 10%. On the other hand, Bajaj Auto’s two-wheeler sales dipped 33% at 1.19 lakh units against 1.77 lakh units. Bajaj Auto MD Rajiv Bajaj said the company will launch an all-new motorcycle this month, “the first of several to be introduced in 2009’’, to stimulate demand. “Targeted at the ‘sport commuter’ segment, this motorcycle will be available nationally at all Bajaj dealers and is intended to further Bajaj’s leadership in the 125 cc+ segment,’’ he said. According to analysts, auto sales are likely to remain depressed till the end of this fiscal as people are expected to stay away from big-ticket purchases in view of the slowdown and high retail financing rates. The credit crunch in retail finance will also continue for some time, impacting sales. On the decline in December sales despite lucrative deals and reduced prices, they said this was because dealers were clearing pending inventories. “The sales numbers announced by the companies are factory dispatches. These are low as dealers are currently clearing only pending stocks and not taking fresh deliveries from companies,’’ an analyst said.
Exports fell 9.9% in November to $11.5 billion, the second month of negative growth, as demand dwindled in US and Europe, following the global financial crisis. In October, exports dipped 12.1% to $12.8 billion. However, in rupee term, exports in November rose 12% with increase in realisations, owing to 20% depreciation in the value of rupee against dollar in the last one year. During April-November, exports grew 19.4% to $119.3 billion. It seems government will have to take some big measures to achieve the export target of $200 billion for 2008-09. “Sectors like leather, textile, gems and jewellery have been hit hard because of demand slump in US and Europe,’’ export body FIEO president A Sakthivel said. He further added that exports are likely to be hit for few more months. The government has already announced a number of measures to boost exports. It has provided subsidies to lend funds to exporters at concessional rates. But, because of the slowdown in the developed economies including US and Europe, the demand has taken a hit.

The New Year has brought good news on pricing front as inflation has further gone down to 6.38%, creating enough space for RBI to infuse liquidity to bring down the interest rates. The annual inflation fell by 0.23 percentage points due to falling prices of food and fuel items during the week ended December 20. This was the eighth consecutive weeks of downside movement of the inflation.