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India’s automobile sales fell the most in 16 years last month after Prime Minister Narendra Modi’s unprecedented clampdown on cash prompted consumers to delay their purchases of cars, motorcycles and trucks.

Automobile sales fell 19 percent to 1.2 million units in December, the biggest drop since the same month in 2000, according to data released by the Society of Indian Automobile Manufacturers in New Delhi. Passenger vehicles sales dropped 1.4 percent while scooters and motorcycles — a key indicator of rural demand — fell 22 percent, the biggest monthly contraction on record.

“Demonetization has had its impact on the industry although we feel it is a temporary phase,” Vishnu Mathur, director general of SIAM, told reporters in New Delhi. India’s budget, scheduled for Feb. 1, should include measures to increase disposable income of consumers to improve sentiments, he said.

The drop in auto sales is yet another indication that Modi’s move to suck out 86 percent of the currency in circulation is slowing Asia’s third-largest economy. The industry will miss its 12 percent sales-growth target if Modi’s budget doesn’t include sops for the industry, Mathur said. Gross domestic product is expected to expand 6.8 percent this fiscal year, according to the median estimate in a Bloomberg survey of 18 economists. That’s slower than the 7.7 percent expansion predicted before Modi’s Nov. 8 move.
(Bloomberg)