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Admin 2019-08-15

15th Aug 2019: The Hindu Editorial Analysis

1) Symptom as the cause: On automobile industry woes

  • India’s automobile industry is experiencing a snowballing (rapid increase in) crisis of demand that shows no signs of abating (decreasing), leave alone reversing (turn back). Domestic sales across all vehicle categories slid (slew) 19% year-on-year in July, as passenger vehicle despatches plunged (came down) 31% to register the segment’s steepest (sharpest) fall in almost 19 years. And with the wheels having come off both two-wheeler deliveries and commercial vehicle shipments, with the former contracting 17% and the latter slumping (last mentioned decline)  26%, the picture is one of widespread gloom (depression).  

  • The straightforward interpretation of the data is that demand has dried up in all corners and among all key consumer segments - urban, semi-urban and rural and personal and institutional. Nine straight months of contraction in passenger vehicle sales have also begun extracting a toll in terms of showroom closures and lay-offs at dealerships, component suppliers and vehicle makers themselves. 
  • While the Federation of Automobile Dealers Associations recently warned of more jobs being at risk, on top of about two lakh positions that have already been shed (thrown off), the Society of Indian Automobile Manufacturers admitted that the industry had laid off at least about 15,000 contract workers in the last three months. That the broader economy is experiencing a serious slowdown has been evident for some time now and the latest data from the auto sector only bears testament (strong indication) to it. And as the RBI acknowledged last week “private consumption, the mainstay of aggregate demand” remains sluggish (slow).
  • While some of the factors currently bedeviling (confusing that) demand in the auto sector are well established — the liquidity crunch in the NBFC industry and the resultant tightening of credit availability to finance vehicle purchases, an increase in upfront insurance costs and the 28% GST charged on cars, motorcycles, and scooters — the fact that manufacturers overestimated demand when setting up capacity, especially of fossil-fuel-powered vehicles, has largely been overlooked. 
  • For example, Maruti Suzuki, India’s largest carmaker, has announced plans to stop selling diesel cars from April 1 as demand has slumped (declined). In 2012, the company decided to invest ₹1,700 crore in a new diesel engine plant in Gurugram, the capacity that it now needs to repurpose (use for a different purpose) or idle (close). Simultaneously, the ride-share industry has mushroomed (grown) in recent years, especially in urban areas where choked roads and lack of parking space have incentivized rapid adoption of app-based commuting. 
  • The outlook (prospect) too, especially for the near term, looks far from hopeful. The RBI’s July round of its Consumer Confidence Survey, which reflected a decline in consumer confidence in July, shows 63.8% of respondents expect discretionary spending will stay the same or shrink one year ahead. In June 2018, the comparable reading was 37.3%. The onus (burden) now lies on the government to urgently formulate policy interventions to address this sectoral crisis or risk wider contagion (larger depression).


2) Unethical actions: On Sikkim MLAs defection

  • The switching of sides by 10 MLAs from the Sikkim Democratic Front (SDF) to the Bharatiya Janata Party in Sikkim on Tuesday and later two others from the SDF to the ruling Sikkim Krantikari Morcha (SKM) brings a sense of deja vu. The en masse shifts are reminiscent (remindful) of what happened in Arunachal Pradesh in 2016, when rebel Congress MLAs joined the People’s Party of Arunachal in order to get over the legal hurdles to defection. 
  • These actions have reduced the SDF, which ruled the State for 25 years with Pawan Kumar Chamling as the Chief Minister with the longest tenure in India, to just one MLA — Mr. Chamling himself. Such a shift might well have helped the former SDF legislators stay clear of the anti-defection law, which stipulates (specify) that a breakaway group must constitute at least two-thirds of the legislative party’s strength and that it must merge with another party. 
  • But this was an unethical manoeuvre (tactic), as the elections to the Sikkim legislative Assembly were held barely three months ago and the BJP had come a cropper without winning a single seat and just 1.6% of the overall vote. The BJP has shown no qualms (concern) as seen elsewhere in Karnataka, Arunachal Pradesh among others - about poaching (preparing) legislators instead of winning over support organically through a democratic mandate. 
  • The Sikkim defections have added yet another chapter to the hollowing out (removing) of the anti-defection law. The SDF, which finished with 15 seats (two since vacated), was a National Democratic Alliance member, but has now been replaced by the 18-member SKM in the BJP-led North East Democratic Alliance.

  • The SKM might have secured a clearer majority with the defection of two SDF MLAs to its fold, but a cloud of uncertainty hangs over its party leader and Chief Minister P.S. Golay alias Prem Singh Tamang. Mr. Golay was convicted in 2016 in a case of corruption and had served a sentence in prison for a year until August 2018. 
  • The People’s Representation Act, 1951, mandates that a person convicted under the Prevention of Corruption Act cannot contest an election for six years after release. The fact that he is serving as the Chief Minister (he did not contest the Assembly polls) despite the conviction goes directly against a Supreme Court order in a similar case dealing with the eligibility of former Tamil Nadu Chief Minister Jayalalithaa in 2001. 
  • The court had then said that the “appointment of a person to the office of Chief Minister who is not qualified to hold it should be struck down at the earliest”. In line with the drastic change in the party composition in the Assembly due to the defections, the continuance of Mr. Golay as chief minister makes a mockery (false representation) of democratic and legal principles. Something is rotten (crappy) in the State of Sikkim.

Source: The Hindu, Google Images