The Automobile Industry Of India Economics Essay

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The tax revenues are expected to suffer due to the slowdown in the manufacturing and infrastructure industries. Budgets for developmental and income-support programs aimed at helping India's rural heartlands are likely to hit compelling rural consumers to save more and spend less.

The recent depreciation of the Indian rupee has made exports more attractive. However, new orders from struggling advanced economies have been subdued and will likely continue placing downward pressure on domestic industrial production. The slowing FDI and volatility in export revenues has continued to exert pressure on the Indian rupee.

The Companies need to find ways to cut costs, improve productivity and manage risks to internalize the impact of inflation, rising interest rate and rupee volatility.

Due to higher borrowing cost and surge in commodity prices, the growth in automobile industry has been moderate during the financial year 2011-2012. The other risk factors that have affected the automobile sector are bad monsoon affecting rural economy, non availability of easy finance to auto sector and its customers, adverse change in law pertaining to excise duty, income tax, Sales Tax, VAT, Customs duty, Service Tax and government policy.

The aggressive recessionary trends have placed the hospitality industry's growth prospects in an extremely precarious and unknown territory. The Hotel industry is linked to the tourism industry which forms the most important support service that affects the Foreign Tourist Arrivals to any Country.

The public-sector banks are more vulnerable to the challenges like loan growth, margin track record, liquidity and inferior asset quality than private banks. The government has failed to provide fresh equity support to public-sector banks and the lack of support has hindered the operations of the bank. The banks oppose the inflow of private automotive equity investment, as it would erode the control and threaten jobs and benefits.

The Indian real estate is facing challenges like liquidity, lack of availability of serviced urban land, continuing procedural delays in approvals, the slow pace of infrastructural growth and the country has relatively low transparency.

The data is collected through questionnaires and analysed by using Graphs and Statistical tool SPSS. The data from Thirty automobile companies, fifty two aviation companies, Ninety Banking and Financial institutions, one hundred and twenty four hospitality companies, one hundred and fifty three IT companies and fifty one Real Estate companies respectively are collected and analysed.

There are twenty six questions, twenty seven questions, twenty four questions, twenty nine questions, twenty six questions and twenty one questions respectively framed in the form of questionnaire and these questions are divided into three parts as per the objectives and hypothesis.

6.1 AUTOMOBILE COMPANIES

The Automobile industry of India is one of the fastest growing industries of the world. The Indian automobile industry manufactures cars, buses, three wheelers, two wheelers, commercial vehicles, heavy vehicles and provides employment to majority of Indian workforce. The Largest automotive companies in India are Ashok Leyland, Bajaj, Mahindra & Mahindra, Maruti Udyog, Tata Motors, TVS and Yamaha. Since 1991, after economic recession the Indian automobile Industry was growing significantly as the liberation brought restriction free environment among the automobile industries in India and foreign countries.

The growth of Indian automobile industry is affected due to the hurdles caused by Indian political, economic system, cutthroat competition and industrial recession. Some problems like domestic sale and export of vehicles surfaced in the Indian Automobile sector since 2007 due to global economic meltdown which affected the Indian economy in the form of economic recession. Therefore we need to bring about reforms which will help us to re-correct the problem and will provide better space to develop automobile industry in India.

The Recession affected economy has bruised the Indian auto industry with sales decreasing and many joint ventures being put on hold. The lack of consumer finance and high interest rates are affecting the consumers from buying vehicles.

For the purpose of data analysis, thirty automobile companies are selected which manufactures cars, three wheelers, two wheelers, commercial vehicles, heavy vehicles and also spare parts through ancillary industries. There are twenty six questions framed in the form of questionnaire and these questions are divided into three parts as per the objectives and hypothesis.

6.2 AVIATION INDUSTRIES

The Indian aviation sector showed a significant growth after liberalization in mid nineties due to the entry of private service airlines. There were new budget airlines and private players came into business and thus making the public sector Air India and Indian Airlines more competitive in the process. As there were more flights coming in to business in India, the number of job opportunities in the aviation sector had also gone up. Students had started signing up for courses like airline Pilots, flight attendant's and ground crew. The job growth rate, salary and perks were pretty high. When aviation sector was at its peak, US economic recession came into existence in 2009. India felt that the recession would not affect the economy of our country, but the hopes were shattered.

The recession started slowly affecting the economic sectors including the aviation industry of India. As the cash starved managements started looking for cost cutting measures, layoffs started to come in to action. Some people have lost their jobs already. The new recruitments are going at a slow rate. Currently, the market is not great for the aviation industry in India and also the same for the rest of the world.

Unfortunately, most major airline operators in India such as Air India, Indian Airlines, Jet Airways and Kingfisher Airlines have reported large losses since 2006, due to high aviation turbine fuel (ATF) prices, rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price competition. The problem was also compounded by new players entering the industry even before the existing players could stabilize their operations. As a result of the already weak domestic scenario, the aviation sector suffered even further when the recession hit India, which exacerbated all these factors.

Currently it is a sober moment for the aviation industry in India. Anyone who have lost their jobs in the aviation industry in the recent recession should consider this situation as a chance to refurbish their skills. Going back to flight school and getting some more certifications while the market is running low would be a smart idea. Polishing the skills will keep the people in great shape once the economy will be back on its feet. Once the Indian economy is back on the run again, any additional skills learned while the economy is dragging could be a great asset for all of those who have lost their jobs.

For the purpose of data analysis, fifty two avaiation companies are selected which manufactures domestic and international aircrafts, war planes, and also spare parts through ancilliary industries. Among these fifty aviation companies there are few foreign aviation companies who have their offices in Mumbai and other metropolitain cities of India. Since these foreign aviation companies contribute foreign remittances to India, it is included in the aviation companies. There are twenty seven questions framed in the form of questionnaire and these questions are divided into three parts as per the objectives and hypothesis.

6.3 BANKING AND FINANCIAL INSTITUTIONS

The economic development of any country depends upon healthy and wealthy banking system. Banks play an important role in development of the economy. They provide loans and capital to the business, industry, agriculture and other sectors of the country. The Loss incurred by these banks bring serious threat to the economic development of the country as it effects the capital market and money market which provides long term and short term lending to the economy.

The current world recession has its roots in sub- prime crises caused in US. The greedy, uncontrolled and mighty banks and financial institutions provided loans to those borrowers who were not eligible for the same. The whole banking industry of the world came in to danger due to the trouble caused when the second class of borrowers failed to refund their loans. The global banks and brokerages have had to write off estimated $ 512 billion in sub-prime losses. City group suffered a loss of $55 billion and Merril Lynch about $52.2 billion.

The impact of financial crisis in India was felt in terms of reduced export earning, drastic decline in industrial growth and employment, depreciation of rupee, reduction in foreign exchange reserves and down turn in stock markets.

The Indian banks were lucky to avoid the first round of adverse affects of recession because as they were not overly exposed to subprime lending. However, the second round impact of the crisis affected India quite badly. The liquidity squeeze in the global market following Lehman brothers' collapse had serious implications for India, as it not only led to massive outflows of foreign institutional investment but also compelled Indian banks and companies to shift their credit demand from external sources to the domestic banking sector. It thereby exerted pressure on domestic market liquidity, thereby giving rise to a credit crunch.

For the purpose of data analysis, ninety companies are selected. There are twenty four questions framed in the form of questionnaire and these questions are divided into three parts as per the objectives and hypothesis.

6.5 INFORMATION TECHNOLOGY COMPANIES

The Indian IT sector was the worst affected because 75 per cent of its revenues come from the United State Companies. Low demand for services had forced the most Indian Fortune 500 companies to slash their IT budgets. Service industry contributes about 52% to India's GDP growth. Among the service Industries IT is also a form of Service Industry. If the service sector takes a serious hit, India may have to revise its GDP to about 8 to 8.5 per cent or even less.

The US companies were passing through a corridor of uncertainty as they came into terms with the slowdown, or recession, in the US economy. They could not decide on their budgets. The new project and business starts had been delayed because of the uncertainty which definitely impacted Indian software firms. The Indian outsourcing companies witnessed a slump in hiring activity owing to the current global economic scenario.

Most of the projects are from the US clients, the financial crisis of the US had hampered business in India, which lead to job cuts. When India was facing a tough situation due to inflation, the financial crisis in the US added a new dimension to the existing turmoil. Indian IT companies, which earn their revenue from the US and the Europe, had fallen flat after the US passed the debt-limit bill. IT majors like TCS, Wipro and Infosys, witnessed a huge fall in their share prices in trading on BSE .Companies like Tech Mahindra, HCL Tech and Patni Computer are also facing a tough situation in the current days.

For the purpose of data analysis, one hundred and fifty three IT companies are selected which manufactures IT products and spare parts through ancilliary industries.They also provide enabled services and business solutions to various fields such as banking and finance, telecommunications and insurance before and after to the customers. Some of the examples of services are medical transcription, back-office accounting, insurance claim and credit card processin. There are twenty six questions framed in the form of questionnaire and these questions are divided into three parts as per the objectives and hypothesis.

The Global economic uncertainties have affected India's real estate market. The Major Real Estate players are facing overall slowdown in demand in and around India. The Property prices and rentals are shrinking which has led to the erosion in market capitalization of many listed players of real estate. Many current projects of real estate developers have been stalled due to lack of funds and investors either do not have funds to invest or are reluctant to do so which has forced the companies to sell of the properties at a lower value. This scenario has made the property dealers to face challenge of getting buyers to their properties. The Rising costs, lack of capital, reluctance of buyers have all contributed to the current scenario of reality sector .The increasing prices and interest rates have dampened the spirits of real estate players. The repeated increases in interest rates have led to a decline in sale of residential properties. The Flow of funds has become a major concern among the real estate developers as they are reeling under high debt and foreign direct investment inflows have also slowed down. For example, in Mumbai, volumes have dropped 70% but prices are up 20%.

Many IT companies are looking to pre-lease office space to take advantage of the favourable commercial terms which is currently being proposed by commercial office space developers. The Demand for offices is expected to remain stable but supply is expected to outweigh demand in most prime cities of India. Commercial office space rents and capital values are expected to increase across all cities. Prices of commercial properties have increased by 10-15% in 2011 in most markets.

The challenges that Indian real estate is facing now is the expensiveness of liquidity for real estate, the lack of availability of serviced urban land, continuing procedural delays in approvals, the slow pace of infrastructural growth and the country has relatively low transparency in real estate terms.

In terms of commercial real estate outlook, there has been a demand contraction of about 15% with reference to absorption in 2011. We can expect an supply increase in 2013 and 2014, but supply for 2012 is by and large on track.

With the recession hit, the real estate development authority has decided to stop the land auctions from next year 2013 onwards.It has been learnt that due to downfall in real estate market, since three years Mumbai Metropolitan Region Development Authority (MMRDA) has not leased out their lands in the Bandra-Kurla Complex (BKC).

The top priority for most realty companies will be to reduce debt, which could mean deep discounting opportunities for buyers. The Real Estate Regulatory Bill which seeks to bring transparency should encourage buyers.

For the purpose of data analysis, fifty one Real Estate companies are selected. There are twenty one questions framed in the form of questionnaire and these questions are divided into three parts as per the objectives and hypothesis.

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