After Pandemic, Inflation and Weather made markets worse

In 2020 when COVID-19 spread to become a worldwide pandemic, it brought the Economic sector of many countries down along with the people. The steady balance of the markets trade, demand and supply rules were all disrupted. Even after almost a year has passed without so much of its effect, factors like Inflation and extreme unseasonal weather events have taken the role of COVID-19 in the upcoming years to spoil the Markets for many people and Indian Conglomerates. 

When COVID-19 began to make its place in India, a heavy lockdown was imposed over the people which forced them indoors. The Corporate sector employees had to live with their savings and even at times force savings, and many others in the informal sector became unemployed. The problem with the people was basically the supply demand mismatch and low and uncertain income. 

Economists claimed that the recovery of the economy is witnessed, but the recovery is not of benefit to everyone. The recovery is the one with K-shaped, where some parts of the economy may experience strong growth but others continue to witness decline. In India the strongly growing economy was of the rich and decline was of the poor. Meaning that the rich were getting richer and the poor were getting poorer. 

The rural slowdown will probably lower out and soon recovery will start getting more equal than from here. 

The Market Conditions

Mass consumption was heavily reduced in the pandemic, followed now by inflation. The market of auto numbers was seen in a weak spot. Two-wheeler products were even at a lower spot. In pre-pandemic peak time, the volumes of the two-wheeler were even lower by 24%. Luxury car companies are witnessing some rise despite the inflation. The companies continue to post record sales. In two-wheelers, the major drop in the market has been witnessed in entry-level scooters and motorcycles. The reason for the high fall of the scooter sales market was that the automakers were passing on the high input costs causing the main drag in the product sales. 

The high cost of input sales is due to the overall cost of acquisition in  the entry-level segment of the scooter and motorcycles, which has gone higher, given the insurance cost and the interest rates, debt to equity financing of the product, company’s capital, and many other factors. 

Correction in the Market

The overall cost of acquisition which seemed to be rising constantly, is now getting back on track. It seems to be being corrected now. 

As per the data from the Federation of Automobile Dealers Association (FADA), the sales of two-wheelers rose in the month of May and June after seeing a wide contraction in the month of April. The maximum sales peak of the two-wheelers, scooters and motorcycles should be reaching its peak by this year only. 

Rural consumers

A normal seasonal monsoon and a good increase in the minimum support price for Kharif crops are mainly the factors to be expected to boost the disposable income of many rural consumers. What is expected to be a cherry on the top is the incoming wedding and festive season. The sales are generally expected to rise this time as usual every year has witnessed the same. 

What problems may lie ahead? 

The inflation and other unwanted weather events may be challenging for the companies. 

 The economists expect the volumes to continue to recover gradually due to the high levels of cumulative inflation and the undeniable fact that consumption habits typically recover with a lag.

In the case of weather, the situation may still persist. The onset of El Niño has set in early this year and could heavily impact the latter part of the monsoon. But the main thing to be focused on would be the Indian Ocean Dipole, because if that remains positive, the situation may turn out less complex. The impact of El Niño would be less severe.