India's GDP figures are dropping every quarter and the economy’s growth projections are down too. The ratings were revised and reduced recently, not only by international institutions like the IMF or the World Bank, but the RBI too considers that the growth is expected to be slow in the coming years. Automotive industry too is witnessing the worst slowdown it has seen in almost ten years. Considering the fact, that government is aware of the situation, it was expected that the minister Nirmala Sitharaman would announce some relief for the industry in the budget. It was expected that the relief may come in the form of announcement of incentive-based scrappage policy or GST rate cuts. Both of which would have boosted demand. Which expectations were met and which were unmet, find out below.
The industry body SIAM and other bodies are unanimous on the decision of the incentive-based scrappage policy and had made recommendations about the same. The minister steered clear, and did not mention the automotive sector and neither were any announcements made specific to the industry. While answering the questions she did mention that the work is underway on the scrappage policy, however she was not in the position to make any announcements yet. According to the minister, the budget was not being made keeping in mind a specific industry, but with a larger objective to put more money in the hands of people. The budget makes allocation of Rs 4,400 crore for clean air, a step welcomed by all. A major boost is likely to come in the form of infrastructure push and projects announcements since Rs 1.7 Lakh crore is allocated specifically towards the development of 2500 access control highways, 9000 km eco-development corridors, 200 coastal and port roads and 2000 km of strategic highways. We can expect accelerated development of highways will be undertaken. Delhi-Mumbai expressway along with two other projects are set to be completed by 2023. Minister also added that further monetization of 12 lots of highway bundles of over 6,000 km is also planned before the year 2024.
Industry expectations were that GST on cars will be reduced from 28% to 18%. However this did not come to fruition and the rates remain unchanged. Demand of budget allocation for diesel buses procurement by state transport undertakings and zero customs duty for lithium ion batteries have also not been considered in the budget. Since the financial support for the EV sector was addressed through the FAME – 2 scheme and GST rates were dropped previously from 12% to 5%, the GST rates for EVs also remain unchanged and no more additional benefits have been announced.
While importers are largely unhappy with the move. Some manufacturers are appreciating the move as it is likely to boost local manufacturing. These measures will result in a rise in prices of electric buses and passenger vehicles sold in India by companies like Olectra Greentech, Hyundai Motor India Limited and MG Motor India Limited are also going to be impacted since they were bringing in products using this route.
It’s expected and people in the industry are hopeful that measures adopted for agricultural, rural-development and irrigation based projects are likely to boost rural economy and have a rub-off effect on the auto industry if implemented immediately.
In the comment section, let us know what you think of the steps announced
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| India's GDP projection |
Industry expectations were that GST on cars will be reduced from 28% to 18%. However this did not come to fruition and the rates remain unchanged. Demand of budget allocation for diesel buses procurement by state transport undertakings and zero customs duty for lithium ion batteries have also not been considered in the budget. Since the financial support for the EV sector was addressed through the FAME – 2 scheme and GST rates were dropped previously from 12% to 5%, the GST rates for EVs also remain unchanged and no more additional benefits have been announced.
Read: Why Electric vehicles are great despite shortcomingsA hike on applicable custom duty for SKDs, CKDs and CBUs were announced during the budget. SKDs (bus, trucks, two-wheelers etc.) was increased from 15% to 25%. Import duty on SKDs of passenger vehicles, three wheelers were doubled from 15% to 30%. Applicable duty on passenger vehicles, three wheelers coming in via CKDs was increased from 10% to 15%. A great increase was reserved for CBUs which will now see an import duty of 40% as opposed to previous rate of 25%. Hike was also announced on catalytic converters which were brought in via import from 10% to now, 15%. As a respite import duty was announced on precious metals used as raw materials like platinum or palladium, which are used in manufacture of catalyst. The duty was reduced from 12.5% to 7.5%.
While importers are largely unhappy with the move. Some manufacturers are appreciating the move as it is likely to boost local manufacturing. These measures will result in a rise in prices of electric buses and passenger vehicles sold in India by companies like Olectra Greentech, Hyundai Motor India Limited and MG Motor India Limited are also going to be impacted since they were bringing in products using this route.
It’s expected and people in the industry are hopeful that measures adopted for agricultural, rural-development and irrigation based projects are likely to boost rural economy and have a rub-off effect on the auto industry if implemented immediately.
In the comment section, let us know what you think of the steps announced
