India’s Economy Suffers Car Crash, Pain Spreads to Villages

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Cars are seen parked at Maruti Suzuki’s plant at Manesar, in the northern state of Haryana. — Reuters

MANESAR (Reuters) — The narrow lanes in Aliyar and Kasan villages in Manesar, an automotive manufacturing hub on New Delhi’s southern outskirts, would usually be packed on Sundays with migrant workers employed at the nearby plants enjoying their day off, but not anymore.

These are hard times for an area dependent on the fortunes of companies like Maruti Suzuki (MRTI.NS), the carmaker with the largest market share in India, and motorbike maker Honda Motor Co’s (7267.T) local unit. The auto and component makers in and around Manesar, have shed thousands of jobs.

Nationwide, according to industry estimates, automakers, component manufacturers and dealers have laid off about 350,000 workers since the start of the year, in response to plunging car sales. Figures for August, like July, are expected to show a drop of more than 30%, making a 10th straight month of decline.

As the crisis in the sector bites harder small businesses in the towns and villages around Manesar, home to one of the three plants where Maruti Suzuki cars are made, have seen a fall-off in trade.

“There are already fewer workers in the village and those who still have jobs are either not getting paid for working overtime or are not spending as much out of fear they may lose work and need the money,” said grocer Rahul Jain, his shelves stacked with toothpaste and soaps from fast-moving consumer goods companies like Hindustan Unilever (HLL.NS), Colgate-Palmolive (COLG.NS) and Dabur India (DABU.NS).

Even sales of products like cooking oil and flour have fallen. On the lower rungs of the service sector, barbers and tea stall owners said they had fewer customers.

Shoe seller Subhay Singh, in Manesar’s Aliyar village, has days when he doesn’t make a single sale.

“My monthly earnings have halved,” said Singh, who a year ago made an average 8,000 rupees a day. “I don’t know what’s happening.”

In the United States there was an old adage: “When General Motors sneezes, the Wall Street catches a cold.” In India, the impact goes well beyond the stock market.

India’s automotive industry is the fourth largest in the world, employing more than 35 million people, directly and indirectly, and accounting for nearly half of India’s manufacturing output.

The industry has three main centers; Gurugram in the North, Chennai in the South, where among others Ford Motor (F.N) and Hyundai Motor (005380.KS) have plants, and Pune in the West, where Tata Motors (TAMO.NS) and Fiat (FCHA.MI) are located.

All of them are hurting, and the pain is radiating outwards.

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