Recent reports on the economy should alarm the government, provided of course that it wants to get alarmed.
Report from the automobile industry indicates that for the first time, SUV’s are outselling smaller cars. People are no longer buying smaller cars, they are buying fuel guzzling SUV’s.
There could be multiple reasons for this.
First being that our roads are very bad and small vehicles are unable to take the rigor of these bad roads, second could be that more people are now able to afford the bigger SUV’s, third could be that the segment that could think of buying the smaller car has all but disappeared as they try to make ends meet. All of these could also be true at the same time. What is spells is bad days for the country as vehicles still continue to run on imported fossil fuel. There is a movement towards electric vehicles but even these will add to long term pollution as they are not pollution free but they just displace the location of pollution. India’s 65% of electricity, used to recharge these cars, is produced in thermal plants that run on coal.
Second is the demand for luxury homes as compared to affordable homes. Here too, what is looking obvious is that the middle class and the poor class does not have the money to even buy ‘affordable homes’, while the rich are able to and are buying luxury homes as they want to have all the facilities that money can give them. The ultra rich are quitting this country as they find the infrastructure pathetic and feel that they live only once and they have the money to live well in another country that has already passed through the throes of development. Why waste the only life one has in a country beset with corruption and religious intolerance, where one can not even eat what one feels like eating?
The third indicator is the massive fall in savings in the economy. Our savings as a function of GDP has fallen for the last three years. It has fallen from 11.1 to 7.2 and last year to 5.1 percent. On the other hand borrowing by citizens has increased. This indicates severe stress of the poor and the middle class as they struggle to make ends meet. Personal Loans, one of the most costly source of borrowing, an unsecured loan source (hence high risk for banks) are growing. RBI has red flagged this growth and is watching the situation. More than 14,00,000 Crores has been disbursed as personal loans as per a report from RBI.
All these indicators should worry a government. The poor and the middle class form the base of the consumption pyramid. Any erosion in their purchasing power is going to have a deleterious effect on the economy of the country.
Question is, is the government bothered about all these?
It seems the government is taking an ostrich like approach to these indicators. It has decided to bury its head in the sand at this approaching danger and is telling the citizens that all is well, it is Amrit Kaal and is celebrating 75 years of independence as Azadi Ka Amrit Mahotsav!
The rich poor divide is getting worse in the meantime. This does not augur well for the rich too. The sheer numbers of poor and middle class is the consumption engine on which the economy runs. If they don’t have money and jobs, the future will be grim, more for the rich than the poor as the rich are the ones who are creating the goods and services that are to be sold.
All educated advice to the government is falling on deaf ears. The perils of having an uneducated government are there for everyone to see.