AUTO PUNDITZ

Study: India’s GDP growth impact on Passenger Vehicle market!

Passenger vehicle mass-market recession is triggered when India’s GDP growth hovers around 5%. A GDP growth rate of less than 4% in the Indian economy has always resulted in a recession in the Indian passenger vehicle market.


Indian economic growth trend data

India has witnessed negative GDP growth five times since Independence (World Bank data dates back to 1961). Several past recessions were caused by wars or severe droughts, and the latest one was because of a global pandemic. In the early parts of independent India, the farm sector used to account for a major share of GDP. However, in today’s times, it’s the service sector, followed by the manufacturing sector that contributes to a major share of Indian GDP.

Passenger vehicle mass-market recession

For our study, we have considered the pre-pandemic time period between 2000-2019. To gain a better understanding of the multi-player Indian passenger vehicle industry, a decade after the start of Indian economic liberalization (1991).

Definition

  • A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters

Findings

  • The Indian economy has not faced a recession during the 2000-2019 period

  • However, there were periods of relatively slow GDP growth (2000 to 2002, 2008, 2011 to 2013, and 2017-2019)

  • The mass market passenger vehicle industry grew by 8.3% CAGR between 2000-2019

  • The mass market passenger vehicle industry has experienced five recessions during 2000-2019

  • Passenger vehicle mass-market recession is triggered when India’s GDP growth hovers around 5%

  • A GDP growth rate of less than 4% in the Indian economy has always resulted in a recession in the Indian passenger vehicle market

  • There was some lead or lag between slow GDP growth and the Indian passenger vehicle mass-market recession