More cars roll out

Good news from the automobile market comes on top of other small signs of economic recovery. Sales figures released last week by the Society of Indian Automobile Manufacturers should bring more cheer to an already bullish market. Both the passenger car segment and the commercial vehicles segment show definite improvements in sales in the first two months of this financial year over the same period last year. Naturally, things are not upbeat all round; emission norms have put pressure on Maruti and sales of Ford, General Motors, Premier Auto-mobiles and Honda Siel are down too. But the overall improvement in passenger car sales, up 35 per cent in April-May 1999 from April-May 1998, shows that the gains for some have not only come at the cost of others. There has been real growth. A similar story is told by higher sales, mainly by Telco, of heavy and light commercial vehicles. What all this points to is new signs of life in some sectors of the economy. The trend is not all one way. Two-wheeler and othersegments still have to pick up momentum. But it would be safe to say consumers beginning with those in the higher brackets are prepared to spend and some sections of business and industry anticipate a better year.

These early signs of confidence about the future, small though they are at the moment, are heartening. Although sales in the automobile market are often a useful indicator of trends in the economy, one swallow does not make a summer. Happily, more than one bird has been sighted. Reports that more cars are selling come on the back of a modest but four-month-long rise in exports, an estimated seven to eight per cent rise in industrial production and improvements in core sectors like cement and steel. Most people would be unwilling to pronounce final judgment on the state of the economy on the basis of these incipient signs of recovery. The long economic slowdown has made everyone wary. But if no one else is ready just yet to bet on economic recovery, the stock markets certainly seem to be. Rarelyhave markets displayed so much determination to disregard unpleasant news.

At another time, the combination of a weaker rupee, political uncertainty, stalled economic reforms and war clouds would have produced deep gloom. That these factors have not succeeded in dampening enthusiasm for long suggests in part that not all those factors play out negatively for business and industry. For example, a weaker rupee improves export prospects, elections pump more money into the economy and a protracted conflict in Kargil would push up demand for many goods and services. Some would even welcome the respite from political activism in the economy. Market euphoria also suggests the return of a positive outlook on the economy is beginning to take hold. It is not as though the revival of foreign investor interest in Asia and the spillover effect in India account for all the good feeling. A bull run spreading through a number of sectors can only mean there is hope of an economy recovery. Is the market clutching at straws?The automobile industry says no. An even better verdict will be out soon enough when first quarter corporate results come in.