Auto firms stagger output, advance taxes crawl
Reading data on the slowing economy is one thing, seeing how it plays out quite another. Even if the economy is growing at 5.3%, as it did in Q4 FY12, that still means a nominal growth of over 12%, yet auto firms across the country have begun to stagger production. While market leader Maruti has idled 30% of its petrol capacity, Toyota Kirloskar has stopped production of some of its petrol variants, and Tata Motors, Fiat, General Motors and Volkswagen are opting for non-production days and other such measures. Given how the taxman tends to arm-twist firms into paying higher advance taxes?and claim refunds with interest later?the miserable 5% hike in Q1 advance payments for FY13 suggests corporate profits are in deep trouble.
Even EPFO contributions, though for FY11 (FY12 is expected to be worse, but the data has not yet been finalised), have fallen 3%. This is partly explained by the rise in minimum wages across the country?by law, EPFO contributions are only mandatory for those earning under R6,500 per month?but there appear to be other factors at work as well. While around 7,000 temporary and contractual employees in the Pune car belt have been laid off, as Centre for Policy Research Professor Bibek Debroy points out, the larger issue is the dramatic slowing in job creation. At a 9% GDP growth, Debroy says, 12 million new jobs get created each year?at 6% GDP growth, this reduces to just 9 million. The visible signs of the slowdown, like layoffs, will be a lot less apparent, but the impact?for the 3 million Indians who won?t get jobs this year, for instance?is very real.
