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Union Budget 2017-18: Expectations

Union Budget 2017-18: Expectations

Snapshot: With the Union Budget 2017 to be uncovered in a couple of days, the automobile sector sits fingers crossed hoping Finance Ministry considers reduced taxation and incentives to boost morale.

The Union Budget for the year 2017-18 is just round the corner and we believe since India is one of the biggest automobile markets in the world, automobile sector deserves a bigger chunk of the pie. The auto industry solely contributes to about 7 percent to the country’s GDP, and employees more than 29million people. Such enormity should not be ignored from the Finance Ministry. PM Modi’s ‘make in India’ campaign encouraged foreign manufacturers to set-up facilities in India thus increasing employment for domestic people and also reducing costs as opposed to paying huge import duties for CBU (completely built-up) units.

Recently as we all know, demonetisation has left a slight void in sales books across the entire spectrum of industries. Sticking to the automobile industry, ICRA’s report released on 5th January 2017 suggests volumes declined by 18.7 percent YoY in December 2016 in the domestic market. If we split the jigsaw, passenger vehicles sales went down 1.4 percent YoY, LCV declined by 1.2 percent YoY, M&HCV decreased by 12.4 percent YoY, three wheelers by 36.2 percent YoY and lastly two wheeler sales declined by 22 percent YoY. Exports too saw a 3.1 percent YoY decrease by December 2016. Considering the graph falling like a turbo constantly failing to build boost pressure, Union Budget 2017-18 should definitely have some relief for the automobile industry.

Introduction of scrapping scheme will boost sales:

Any incentive for people scrapping their old cars while purchasing a new one will directly and positively affect the industry. Union Road Transport and Highways and Shipping Minister, Nitin Gadkari clearly mentioned that more than 60 percent of air pollution is caused by vehicles that are more than 15 years old. An organised scrapping policy will help combat pollution by stripping old vehicles for parts. Budget should possibly offer cash incentives to encourage owners to voluntarily give up old jalopies for scrapping rather than allowing them to rot and consume critical parking spaces.

Expenditure in rural infrastructure will help:

We expect the government of India to pay emphasis on building better roads and provide a push to the agriculture sector thus helping the automobile sector through farm equipment, two wheeler and passenger vehicle sales in rural India. Heavy farm equipment like harvesters and specialised tractors are still a rarity which definitely enhance crops. Any incentives, reduced taxation and easy finance on heavy farm machinery will surely reap benefits.

Shubh Bansal, Co-founder and Chief of Marketing & Growth, Truebil says,” The Union Budget will undoubtedly be of great importance to the automobile industry. As 2017 was a shaky year for the automobile industry due to demonetization, the industry is still trying to cope up with the situation. The auto industry pins hope on the budget to boost consumer sentiments. There are expectations that government will increase the disposable income."

 

Reduction in excise duty is welcome:

Society of Indian Automobile Manufacturers (SIAM) already suggested a change in excise duty structure to the Finance Ministry. The Government hopefully will act on the matter as it comes as a unanimous suggestion from all auto manufacturers in order to pick up lost sales. Reports state that these taxations alone account for 77 percent costs in the industry.

KN Radhakrishan, President and CEO, TVS Motor Company, states “The Indian auto industry observed strong rate of growth throughout 2016, largely driven by positive policy measures, healthy economic environment leading to robust demand across consumer pockets. It is furthermore crucial for sectors like automobile as it affects the larger operating ecosystem of the sector, which is linked with infrastructural developments, manufacturing policies and frameworks, tax regime etc. In budget 2017, we expect the government to introduce balanced economic measures which enhance ease of doing business within the country, boost consumer demand and catalyze economic growth. Therefore, in our view the finance ministry must minutely evaluate these crucial economic contributors and lay necessary thrust on each one of them, so as to give further impetus to growth and enhance disposable incomes and boost spending.”

Advantages to alternative fuelled vehicles:

It may be said that alternative fuelled vehicles are not yet polished for mass usage yet but unless the Government shows interest on this particular topic they might never get polished till it gets too late. Electric two wheelers, four wheelers and hybrid drive vehicles release very less or no harmful emission while running but their costs of manufacturing is high which means they retail for a lot of money. Providing subsidies will enable a larger chunk of buyers to own them and motivates manufacturers to continue researching on enhancing battery capacity and performance.

Lots more can be done:

The proposed GST (Goods and Services Tax) Bill will be another positive initiative simplifying the tax structure and streamlining it. Lower loan interest rates too will empower people to spend on a vehicle of their own. Also why not increase taxes on diesel powered passenger vehicles since they cause significantly more particulate pollution than petrol and CNG. India is one of the key automobile markets in the world, and let us not forget that most of the value for money, fuel efficient and robust vehicles are developed in the country and shipped across the globe. This is one sector the Government should take very seriously now for the benefit of everybody connected to it.

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