No fuel in the budget for struggling auto sector

NEW DELHI: No cut in GST rates, no announcement of an incentive-based scrappage policy and finally no real measures to create demand for automobiles. Finance Minister Nirmala Sitharaman’s second union budget had very few direct proposals that would uplift sentiment in the crisis-hit auto sector.

Reeling under major slowdown for over a year, India’s auto industry recorded its worst-ever sales slump last year in over two decades. According to SIAM data, overall auto sales in 2019 declined by 13.77 per cent at 2,30,73,438 units as against 2,67,58,787 units in 2018, as vehicle prices witnessed a significant hike in the last 18 months, economic activity slowed down and rural consumption fell to record low.

The auto industry was quite hopeful that the GST reduction will take place in the budget to compensate for the price hike which bound to happen during BS6 transition from April 1, 2020.

Rajeev Singh, Partner, Deloitte India on the Union Budget 2020 said, “The two big misses from automotive perspective were no announcements regarding GST reduction especially to offset the increase in prices due to BSVI vehicles. The industry was also expecting announcement around the scrappage policy for not only boosting the demand of new vehicles but also ensure the old polluting vehicles are pulled out of transportation system resulting in cleaner air.”

Auto lobbying body SIAM said that specific recommendations made by them to create demand were taken into consideration. “The Indian Automobile industry was looking forward to some direct benefits in the budget, which could have helped in reviving demand in the context of the current slowdown and huge investments made by the Industry for transition to BS-6 and from that aspect, the Budget speech was not what we were expecting,” said Rajan Wadhera, President, SIAM. 

Experts also believe that relief in personal income tax, as proposed by the FM, is unlikely to have any positive impact on car buying. “It was disappointing that as part of auto ecosystem, no direct benefits for the automobile industry was announced. A budget allocation for an attractive incentive based Scrappage Policy would have been a demand booster for commercial vehicles and also a positive for cleaner environment and road safety,” said FADA President, Ashish Harsharaj Kale.