If public transport becomes too good, it will be bad for the economy and government revenues
Have you ever been stuck in a jam on MG Road in Bangalore or Ring Road in Delhi? That’s because there are too many cars! When everyone drives, the roads get super crowded. A trip that should take 15 minutes can take an hour!
Think about how much room a car needs, to transport just one or two people. A bus, or train, on the other hand can fit in much more people in the same space. Imagine that all of the car users switched to buses. Our roads will become fast-moving immediately. If the buses are electric or hybrid or some other green fuel, pollution would reduce very quickly too.
There is also the fact that private cars in metros run for just a couple of hours per day – they come out, stay parked for the working hours, again come out and clog the roads when commuters drive back home. We are not even using them most of the time. But they are convenient, for sure.
India’s urban landscape is defined by its megacities, with Delhi NCR, Mumbai, and Bengaluru at the forefront. These cities are not just the epicenters of economic activities but are also emblematic of the country’s rapid urbanization. However, they are increasingly becoming synonymous with overpopulation, traffic congestion, and urban chaos. Despite various initiatives and proposals to decongest these cities, the harsh reality remains that Delhi NCR, Mumbai, and Bengaluru will always be too crowded.
If this is the case, why don’t governments focus on top quality public transport?
Good public transport for people, available from doorstep to metro station to workplace, can tempt a lot of people to keep their cars at home. We can already see this in places where there is easy access to metro trains and transport buses. Even easy availability of auto rickshaws, taxi cabs can reduce private vehicles on metro city roads.
Some people will still prefer personal transportation, and governments will have to introduce rules to discourage private transportation, along with improving public transport. For example, ban vehicles from crowded city centres or very crowded roads, make parking expensive and so on. Highly unlikely, right?
Here are the reasons why car sales will always be encouraged by governments.
The Economic Impact of the Metros on Car Sales
Despite the growth of public transport, Delhi NCR, Mumbai, and Bengaluru together account for a significant percentage of the cars sold in India. These cities, with their burgeoning middle-class populations and rising disposable incomes, are major markets for the automobile industry. Estimates suggest that these metros contribute to around 30-35% of all car sales in the country. This heavy reliance on personal vehicles exacerbates traffic congestion and air pollution but is also a key driver of economic activity.
If public transport becomes very comfortable, automatically, car sales will reduce. People will buy less new cars. Those who already own cars will drive them even less. And this can lead to s huge economic impact.
If the residents of these megacities were to significantly reduce their car purchases, the impact on the automobile industry would be profound. The Indian automotive sector is one of the largest in the world, contributing about 7% to the country’s GDP and providing employment to millions. A sharp decline in car sales from these key markets could lead to a significant downturn in the industry.
The auto industry in India is not just about car manufacturing; it encompasses a vast ecosystem including component manufacturers, dealerships, service centers, and ancillary industries. A slowdown in car sales would affect this entire supply chain, leading to potential layoffs, factory closures, and reduced investments in the sector.
Job losses in auto industry, from factories to aftersales shops
The auto industry in India directly employs over 2 million people and supports several million more indirectly. These jobs span a wide range of skill levels, from high-tech engineering roles to assembly line workers, sales personnel, and mechanics. A reduction in demand for cars, particularly in the country’s largest markets, could trigger widespread job losses, affecting not just the workers in the auto industry but also their families and communities.
Moreover, the Indian government has been pushing for initiatives like “Make in India” and the development of electric vehicles, which are heavily dependent on the strength of the domestic auto industry. A collapse in this sector could derail these efforts, further compounding the economic challenges.
Government Revenue: The Fiscal Implications of a Decline in Car Sales
The central and state governments derive significant revenue from the automobile sector through taxes, duties, and fees. These include Goods and Services Tax (GST) on vehicles, road taxes, registration fees, and excise duties on fuel. For instance, the GST on cars ranges from 18% to 28%, depending on the type of vehicle, making it a substantial source of revenue for both the central and state governments.
It is in the interest of both central and state governments that people keep buying cars. If public transport becomes very comfortable and easy, the car-buying population will stop buying cars resulting in huge revenue loss for all governments.
If car sales were to decline sharply, there would be a corresponding drop in tax revenues. This loss of revenue could have far-reaching implications, affecting government spending on infrastructure, social programs, and public services. At a time when the government is already grappling with fiscal challenges, a decline in revenue from the auto sector could exacerbate the fiscal deficit, leading to cuts in public expenditure or increased borrowing.
We are destined to never get good public transport
Governments will improve public transport to some extent – but it will be done in such a way that the auto industry, auto sector jobs and government revenues are not impacted. So metros will get better, bus transport will improve but you will still prefer a personal car. They won’t get so comfortable that you will stop buying cars. Government policy will make sure of this.
Investments in public transport have been made, with metro systems expanding rapidly in all three cities. Delhi’s Metro, for instance, is one of the largest and busiest in the world, while Mumbai’s suburban rail system is the lifeline for millions. Bengaluru’s Namma Metro, though smaller, is expanding rapidly. Yet, the dependence on private vehicles remains high, and until public transport can genuinely compete in terms of convenience, this dependence is unlikely to wane.
A Delicate Balance Between Urban Mobility and Economic Vitality
The crowded nature of Delhi NCR, Mumbai, and Bengaluru is unlikely to change anytime soon. While improving public transport systems is essential for creating smoother, more livable cities, the reality is that these metros are deeply intertwined with the automobile industry, both as consumers and economic contributors. A significant reduction in car purchases could lead to severe economic repercussions, including the potential collapse of the auto industry, massive job losses, and a significant decline in government revenue.
Thus, the challenge lies in striking a balance—encouraging the use of public transport to reduce congestion and pollution, while also sustaining the economic vitality that the auto industry provides. The path forward requires innovative solutions that address both urban mobility and economic growth, ensuring that India’s megacities remain vibrant centers of activity without being overwhelmed by their own success.
