Albeit part of the much talked-about BRIC ensemble, the Indian economy has gone from hero to zero since the last financial crisis struck around 2010. At first, the nation’s once impressive growth rate plummeted in tandem with the global economy, but then missed the right exit and continued to fall even when the business world got back on track again.
Even though Indian officials excelled at predicting with imposing conviction that it would be just a question of time for the recovery to reach India, the on-going skid eventually culminated in a currency scare. The ‘rupee crisis’ lasted from June through August 2013 and deeply affected the nation’s economic psyche.
But with an election now looming on the horizon, analysts slowly begin to believe in India again. According to The Economist, economic growth is bottoming out around the four per cent mark and India’s precarious balance-of-payments position is improving sharply as well.
“Optimists will argue that the stage is set for a sharp recovery in Asia’s third-biggest economy – if the country elects a more coherent government, in elections due by May,” the magazine said in December ’13.
The main piece of evidence it referred to back then was GDP growth, alongside an improved current-account deficit and the re-awakening of ‘animal spirits’ on the investment front. “On balance, India’s economic health is improving – and according to the data, not just the hunches of its ever-optimistic officials,” The Economist concluded – and a recent statement by Paris-based think tank OECD might actually prove them right.
Reportedly, the Indian economy is expected to clock a growth of 4.9 per cent in the current financial year ending March 2014, compared to a 4.5 per cent GDP expansion recorded in the year-ago period.
In mid-February, India’s Finance Minister and Harvard graduate Palaniappan Chidambaram, offered an (unsurprisingly) optimistic outlook for the country’s economy too, telling Parliament he could “confidently assert” that the economy is more stable than it was two years ago.
“The fiscal deficit is declining, the current account deficit has been contained, inflation has moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased and hundreds of projects have been unblocked,” he said.
As a result, the coalition government led by Prime Minister Manmohan Singh, which came to power in 2004, is now likely complete its second five-year term on a positive note – but the nation’s struggle will continue regardless. Only a day after Chidambaram addressed Parliament, the OECD predicted India would develop below trend in 2014 – even though neighbouring China and most developed nations are set for recovery.
But even if the promised recovery comes over the course of 2014, it may not affect the trailing equipment market directly. Due to a sizable inventory pile-up, production is prone to remain low; and the heavy truck market is still weak too.
“The truck market is possibly on its worst phase in more than a decade. Over the past few years, huge capacities have been commissioned (…). All these additional capacities on the back of a massive economic slowdown are ravaging the industry. It may take another three to six quarters for the industry to regain stability,” the Times of India reported in January – indicating the slump will continue to affect the market even if the overall economy is improving.
According to Nitin Chamaria, CEO of local trailer manufacturer Tranztar, the truck trailer market decreased by as much as 45 per cent on a YTD basis over 2013, and over-capacities continue to put a strain on businesses. While he is confident that the market will rebound at some stage, Chamaria has taken “prudent steps” to overcome the tight situation and is now patiently waiting for better times to come.
Interestingly, Marc Llistosella, Managing Director and CEO of Daimler India Commercial Vehicle, is still bullish about the industry’s long-term performance. In an interview with the Economic Times, he demanded a scrappage policy for old and unsafe equipment that could help turn the market around; yet it is unlikely to see large-scale political movement before the Election in May.
In fact, local truck journalist Balasubramanian Natarajan is not expecting any progress until September 2014. “The trailer market is in a really worrying shape and the truck market is down too,” he says – stressing that the fundamentals of the economy are still very strong. “Some interesting new products are about to hit the market, so there is still some excitement out there going forward.”
Plus, if global attention is anything to go by, India’s trucking industry is not written off just yet. Over the past few years, the local market has witnessed a spate of entries into the commercial vehicle segment – including Volvo, Daimler, Scania, Navistar and Beiqi Foton, who are not only eying the traditional rigid market. US powerhouse Paccar also undertook a feasibility study in 2013, showing that heavy transport is still high on the agenda in India. The question, however, is when will the economic framework allow for the market to awake from the deep slumber it has seen lately?