CHENNAI: The past few months, especially the two months since demonetisation, have been tough for the automobile industry. With growth coming to a halt in the aftermath of the note ban, sector experts and industry players are unanimous in saying that only a positive Budget can bring the sector back on its feet.
With the industry primarily looking for measures to boost consumption, any government sops along those lines will only serve to enhance the purchasing power of consumers, even if they do not result in a direct reduction in automobile rates.
According to experts and industry players, any incentives to boost consumption will need to bring back rural demand.
“Given the situation post November 8, we expect the finance minister to... provide rural stimuli to revive and boost consumer, business and investment confidence,” pointed out Pravin Shah, president & chief executive (automotive), Mahindra & Mahindra Ltd. “In the short term the economy has been shaken and this budget will have to bring the economy back on growth track.”
Experts like Abdul Majeed, auto analyst and partner, Pricewaterhouse Cooper, say that the Budget might also come out with incentives that could be indirect multipliers for the sector. “A reduction in both corporate and individual taxes, by increasing income tax slabs, is likely and will loosen up purse strings,” Majeed said, adding that other incentives to boost infrastructure and housing, will also act as indirect multipliers to boost sector growth.
Roy Kurian, vice president, sales & marketing, Yamaha Motor India concurred, stressing again on bolstering rural demand. “The two-wheeler sector also hopes that the rural infrastructure is given due share, as development will directly lead to rise in sales,” he added.
The industry is also pushing for a status quo, at the least, in Research and Development (R&D) incentives. The Society of Indian Automobile Manufacturers stated that it has recommended that the government keep weighted deduction of 200 per cent, provided for monies spent on R&D, until March 31, 2020. The finance ministry has proposed to reduce this to 150 per cent from April 1, 2017.
But experts caution that customs duties might be increased to strengthen local manufacturing, while a hike in service tax to bring it on par to the GST ahead of its roll-out is also possible.