So the union budget for the year is here and it seems to have made up to the expectations of the automobile industry. It focuses to shorten the bridge that has formed lately between the haves and the have nots of our society. It is oriented to provide market benefits to the rural infrastructure and those who are less benefitted by our economy.
The budget mentions an investment of Rs. 64 thousand crore in the highway projects all across the country. It has also added special mention of the building of coastal roads so as to improve the connectivity with the ports. Allocation for rural sector for 2018 is Rs 1,87,200 crore and records an increase of 24 per cent under MNREGA increased from Rs 38,500 crore to Rs 48,000 crore. In a place where it still seems a challenge to promote the usage of a four wheeler in rural areas, where every second person prefers to buy a two wheeler instead, considering the employments, condition of the roads and less availability of the dealerships in the villages, it might turn out to be a break through in the trends.
Roland Folger, Managing Director & CEO, Mercedes-Benz India says, "This budget tries to narrow the gap between rural and urban India. By allocating a greater amount to transportation, airports and highways, the focus will be greater on infrastructural development. This will help the auto sector's growth during the long-term."
Recently, SIAM filed a plea to improve the sales in the automobile industry by reducing the border tariff and seems to be happy with the announcement of the Union Budget 2017-18. It stated that the tax is charged only on commercially selling cars and not on other motors like buses or trucks, which has burdened the industry in the long run. To curb the situation, SIAM has demanded to lower the weight from 200% to 150% to be in action from April 2017 till March 2020. The group proposes an increase in the depreciation rate for motor cars, MUVs and two-wheelers from 15% to 25% under the IT Act. On the customs duty front, it has asked that the concessions on identified parts of hybrid/ EV parts to be extended to certain other parts as well so as to allow competitive pricing for vehicles.
The major optimistic change has been in the income tax rate which has been cut from 10% to 5% for individual tax payers earning under ₹ 5 lakh/yr. It will promote the sales of small cars in the sector, thus boosting the sales in the rural areas as well. However, not much has been improved upon in the field of R&D for automotive industry, Electric Vehicles and Hybrid vehicles.
"It will create a positive sentiment among likely first time buyers for entry level and small cars. However, there is nothing substantial for R&D for automotive industry, EV and hybrid vehicles, which is a dampener. We look forward to the implementation of GST for automotive sector in the months to come to offer the much needed stimulus to the auto industry and encourage buyer sentiment and consumer confidence," said Guillaume Sicard, the President of nissan India Operations.
Anand Mahindra, Executive Chairman of the Mahindra Group tweeted that the budget shouldn't be seen as the main policy reform instrument, but he welcomed reforms in political funding and merging of the rail budget.
Now the eyes rest upon the arrival of goods and services tax and what it has to offer for the automobile industry.
