Pulling away: Richest 5 states get 38% of all cars in first half of FY23

India's post-pandemic recovery appears to be shaping up like the letter K, widening the inequality among states. Part 2 of the series examines consumption, represented by passenger vehicle sales

Of the 1.4 million cars and sports utility vehicles registered in the first six months of 2022-23, as many as 0.54 million — 37.8 per cent — were in the five richest states of Delhi, Karnataka, Haryana, Telangana and Gujarat. The share of the poorest five — Odisha, Assam, Jharkhand, Uttar Pradesh and Bihar – was 18.9 per cent, off the peak of 20.4 per cent in 2020-21.

With this, the richest five now register twice as many passenger vehicles as the poorest five, sharply higher than the ratio of 1.74 in 2020-21, according to data from the Vahan dashboard. This indicates a K-shaped recovery in consumption of passenger vehicles to go with the same trend seen in formal jobs (covered in the first part of this series), creating a wider chasm between the country’s richest and poorest states.

The richest and poorest states are ranked on the basis of gross domestic product per capita, which is the total value of all goods and services divided by the population.

Cars and SUVs are beginning to form a larger proportion of the consumption basket. Though 54 per cent of Indian households still own a scooter, according to the National Family Health Survey 5 data, the incidence of passenger vehicle ownership has increased. In 2005-06, 2.5 per cent of the families owned a four-wheeler; in 2020-21, this had increased to 8 per cent.

Vehicle loans account for 12 per cent of all personal loans outstanding, and their ownership can be seen as an indicator of other consumption patterns in households. If consumption trends diverge among states, some will get bigger benefits of a consumption-based recovery than the others.

The share of the richest states in registration of passenger vehicles was in decline until March 31, 2020. The poorest states were catching up until the pandemic arrived. The top five states accounted for 36.8 per cent of passenger vehicle registrations in 2017-18. But until March 31, 2021, their share had come down to 35.5 per cent. However, the richest have pulled away in the recovery phase.