So far amongst all the industries, the best performer has been the automobile sector in India. The main reasons for its enhanced performance are the increased spending buy consumers and the improving economic conditions. The stiff competition faced by several automobile majors has also become very apparent in this market, especially with the Market leader in India, Maruti Suzuki loosing a chuck of its market share during the last year.

There has been a drop of 7% in Maruti’s market share from 54% in the preceding year to 47.59% up to the June quarter for the last one year.  In the history of Maruti’s operations it is the first time that the company has witnessed market shares before 50%.

Maruti Suzuki, in an attempt to strike back and recover its lost market share, is on an expansion spree. The company has decided to expand its manufacturing facility which would provide it an increased production of vehicles. The annual productions numbers would increase t 20,000 vehicles and thus the total vehicles manufactured by the end of the second half pf the year would be close to 1.3 millions. Even auto majors like Hyundai and Toyota are likely to add to the competition with the introduction of their new models.

This move of Maruti comes handy especially given that there has been a  hike in the prices of diesel and decontrol in the prices of petrol. This means that CNG is the only auto fuel that still retains cost effectiveness.

The fact that makes CNG an attractive option for automotive fuel is that even with increase prices, the fuel will still be 30% cheaper than diesel and 60% cheaper than petrol prices. This fuel also provides a lot of emission based advantage as it leads to the reduction of carbon monoxide levels and thus offers vehicle fuel economy.

With the factory fitted CNG vehicles that will be doles out by Maruti, the vehicle owners do no have to go through the trouble of having to go in for modifications later on if the consumer decides to convert the gasoline engine to run on CNG. Such models help do away with the hassles associated with manually fitting a duel fuel system in a vehicle.

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“Surely, yields on government securities had firmed up, but only modestly. Even as fiscal deficit this year, as a percentage of GDP, is lower, the absolute amount of government borrowing in gross terms is roughly of the same order as in last year,” Mr. Subbarao said.

The RBI Governor said that Indian economy should move towards liberalization of capital account gradually and the path should be revisited periodically to effect changes to suit global and domestic economic conditions and to avoid the mistakes that led to the crisis. “Our position is that capital account convertibility is not a standalone objective but a means for higher and stable growth,” he said.

Mr. Subbarao continued, “We prefer long-term flows to short-term flows and non-debt flows to debt flows. The logic for that is self-evident. Our policy on equity flows has been quite liberal, and in sharp contrast to other emerging economies, which liberalized and then reversed the liberalization when flows became volatile, our policy has been quite stable.”

“Historically, we have used policy levers on the debt side of the flows to manage volatility. This has been our anchor when we had to deal with flows largely in excess of the economy’s absorption capacity in the years before the crisis. This has been our policy when we saw large outflows during the crisis. And I believe this will continue to be our policy,” he added.

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The Indian auto industry exhibited healthy sales in December 2009. Some of the companies announced double digit sales growth. Maruti Suzuki reported 37 percent increase in domestic sales for the month of December. The company reported that it had sold 71000 units in December. Hyundai Motors reported 42 percent increase in domestic sales in December. The company sold 47,217 units in December 2009 as compared to 38,502 units in December 2008. Mahindra and Mahindra announced an extraordinary increase of 22,754 units as compared to 10.253 units in December 2008, an increase of about 122 percent.

To capture market share and keep up the momentum, companies have announced new launches in 2010. Maruti Suzuki launched its new seven-seater family car in the auto expo in Delhi this year beginning. Toyota unveiled concept small car (Etios) which has been specifically developed for the Indian market. German auto major Volkswagen introduced its small car Polo and said it will launch sedan version on the same platform in the second half of this year. With many global companies entering the small car segment, we can expect the competition to be stiff. Amidst strong economic conditions that are currently prevailing in India we can be assured of good growth in auto industry in 2010.

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It has been estimated that even in the next twelve to eighteen months, things are not going to change for the better. There are no optimistic projections for the next year or two. The public sector banks, which make up the majority of the banking systems and assets, continue to hold a strong front. The concern for the deteriorating asset quality still looms large.

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