Growth Oriented Union Budget but auto industry wish list remains unfulfilled

Growth Oriented Union Budget but auto industry wish list remains unfulfilled

A pro-people budget with specific focus on rural development, capacity enhancement, infrastructure augmentation and aiming for next evolution of next generation technology in some areas. This is how this budget presented by Finance Minister Mr. Arun Jaitley will be described in due course of time. Though it might not have announced any direct benefits for the automobile industry, it surely has provided a big scope of opportunity for it.

Some of the highlights of the budget from the point of view of automobile industry includes major focus on improving infrastructure by announcing Rs 97,000 crore for development of roads, decrease in corporate tax rate for MSME, reduction in personal income tax at the lower level and allocation towards funding of the electric & hybrid vehicle program through FAME scheme.

The focus shown by the government on improving infrastructure by announcing Rs 97,000 crore for development of roads itself is a big announcement which will directly benefit the automobile industry and lead to development of next generation of vehicles. Out of this mammoth Rs 97,000 crore, Rs 55,000 crore has been earmarked only for development of roads and highways. This development particularly is expected to push up demand for commercial vehicles (CV). Rise in sales of commercial vehicles have a direct correlation with the development of certain sector, resulting in growth of the overall economy.

At the same time, reduction in corporate tax rate for MSME will give relief to the tier 2 and tier 3 automobile component manufacturers and help them make investment for future expansion. The step is expected to fuel research and development at a very significant level and will lead to enhancement of the overall automotive ecosystem.

From consumer point of view, lower taxes are always a good news. With more money to spend, the consumer sentiment is always on the positive side. This is particularly expected to boost sales in consumer vehicles and two-wheeler segment. More than metros, the positive impact of this particular step will be seen in tier-II and tier-III markets and rural areas.

Another noteworthy step is in direction of promoting cleaner and safer vehicles through development of electric and hybrid vehicles. Allocation of Rs 175 crores for this purpose is definitely a step in the right direction and will give right incentive for the automotive players.

Government also announced its intention for creating a right ecosystem for skill development at the right target group. Automotive industry, which employs huge number of people would benefit a lot from a measure like this and enhance the technical and managerial talent of the available pool of human resource.

However, automobile industry had some very expectations from the budget, which still remain unfulfilled. The long-standing demand for incentive based fleet modernization scheme has again not found support in the budget. Moreover, there was a genuine case for continuation of 200% weighted deduction on R&D expenses for auto industry, which remained unacknowledged in budget proposals. Had approved it would have been a big shot in the arm for companies working in this direction.

At the same time, no announcement over vehicle scrapping policy is a dampener. Replacement of older vehicles is a basic requirement to ensure clean environment. At the same time, it is a requirement for developing safer and advance vehicles.

Last but not the least, the importance of automobile industry is well known. We drive growth, connect people, help people meet their aspirations and earn a livelihood. India has one of the fastest growing automobile industry in the world and we have immense capability as well as capacity to grow. The mix of labour which exists here itself is a big reason for us to explore new horizons. Being a participant in the national growth is a matter of pride and automobile industry has been fulfilling its role since decades.

It is important that a critical industry like this be given the right importance through all possible measures. It is important to make favourable policies and ensure that we focus on our key role of making India a shining example of right kind of development. A right policy is a matter of time and budgets perhaps are the best way to ensure that policies are formed in order to promote a specific industry and address a particular cause.

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