Delhi Government's Car Ban. What's the real reason behind it?

Delhi Government has decided to ban 10/15 year old Diesel/Petrol cars on the road. The pitch is that it's to "clean Delhi’s air", and to make "the city breathable again". But all that's pure, unadulterated and perhaps even sinister - Bullshit.

It's a lie.

If you follow the economics closely, you’ll see that the real intention behind this move isn’t "green policy", it’s a desperate act of economic engineering. It's a camouflaged attempt to "manufacture" consumption. And that in an economy where the consumer has already been tapping out for a while.

In FY19, India sold 33.7 lakh PVs. In FY24, the number was still only around 39 lakh. That’s a CAGR of barely 3%, during a period when India’s nominal GDP grew at ~10%. The small car segment (hatchbacks like Alto, WagonR, Tiago) has actually shrunk. Did you know that Alto could sell only 5,000 units last month?

Indian automotive sector is going through a serious demand slump which is predominantly hurting the small car segment. The rich/semi-rich are still being able to buy SUVs, but the neo-middle/middle class are not being able to buy cars at all.

This is the real reason why they've come up with this brilliant idea. They want to spur the demand. But this way?

Delhi has a pollution problem, sure. But if this were about emissions, it'd have made sense to target industrial dust, construction violations, and crop burning. Instead, the government has chosen to go after personal use cars - vehicles owned by the Average Aakash. Someone who bought one car in back in 2015 and hoped to use it judiciously without any problems.

This isn't about pollution. It's about helping the auto industry which is struggling to grow. That's a fair motive, but you can't force people to buy things!

The average Indian borrower today already has ₹4.8 lakh of household debt. And more than 55% of that is for consumption. Not for housing, not for asset creation, not for business expansion. But for pure consumption. For meeting daily needs.

This means that while India is facing a consumption slump, it's also seeing consumption being driven by debt. This is a double whammy. It's like watching Aakash not buy things for the most part, but then buying whatever he needs at borrowed money. Right now (as per my calculations), debt fueled consumption should be at ~1.5% of the total spend. If this figure touches 5-7%, it'd be a mess.

Now this policy, disguised as an eco-reform, will force Aakash to borrow yet again. For a new car. A new EMI. A new burden.

It is, in many ways, a betrayal. Of the frugal. The disciplined. The families that changed tyres, paid insurance, and never missed a PUC check. But the worst part? It won’t work.

Because people don’t buy cars because the old one was banned. They buy when they can afford to. And today, they cannot.

Consumption is not coming back until private capex returns. You can’t force an economic revival by taking things away. More private capex, more factories, more jobs. Not this. Please!

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