Rural market under stress; linking job creation with GDP growth will be crucial: SIAM President

The union budget tabled in the Parliament on 23 July by the Finance Minister Nirmala Sitharaman has some key elements to boost growth. While it is not the only financial document now that has the potential to trigger economic growth, it is important that growth in job creation is now being linked to the growth in India’s gross domestic product (GDP), says Vinod Aggarwal, Managing Director and Chief Executive Officer, VE Commercial Vehicles & President of automobile industry body Society of Indian Automobile Manufacturers (SIAM).

Speaking at the India Today-Business Today Budget Round Table 2024, Aggarwal highlights the lack of enough private investments in recent times, in comparison to public capex. “Private investments haven’t kept pace with government capex for the past few years. When there is more demand more investments come in and jobs are created. Our GDP is growing at 8.2%. Its time that growth in job creation is linked with overall growth,” he tells Business Today Editor Sourav Majumdar.

While sales of entry-level passenger cars and two-wheelers has been under stress for several quarters post-pandemic due to lack of enough disposable income among rural and low-income households, Aggarwal points towards the overall growth that has been recorded by the automobile industry of late. “Overall the auto industry is doing well. The passenger cars market is now valued at Rs 20,000 crore and India is now the third largest PV market globally,” he says.

There, however, visible stress in the rural economy, But the situation is improving. “There is stress in the rural market. That is why we had urged the government for greater allocation in the rural economy. The Rs 2.6 lakh crore allocation for the rural economy is a positive in the budget that will help in recovery. We are already witnessing demand coming back from rural consumers. Sales of two-wheelers grew 28% last month,” says Aggarwal.

Sales of entry-level passenger cars, however, continues to remain under pressure. Country’s largest PV maker, Maruti Suzuki, for instance, recorded double digit decline in sales of entry-level PVs. Some of its top selling models over the years – Swift, Alto, Baleno and WagonR, reported decline in sales for months – at times by as high as 24% year-on-year.

One of the key factors, say experts, is low purchasing power of rural households due to lack of enough job creation and poor income growth over the past few years.