Auto sector looks for big bang reforms to sustain its growth momentum and propel country’s economy

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As the interim budget draws to a close, automobile industry stakeholders are counting on big-bang reforms that will propel the country’s economy forward. While the industry unanimously foresees that the government will make some additional outlays to enhance public sector capex expenditure, many of them are of the view that three will be a greater emphasis on boosting rural income, which could drive an uptick in demand for automobiles, especially for two-wheelers.

Auto industry body Society of Indian Automobile Manufacturers (SIAM) believes that the government will continue with infrastructure spending because of its “multiplier effect” on the country’s GDP and the overall economy. SIAM President Vinod Aggarwal expects it to be a “growth-oriented budget”, wherein there will be more focus on the capital expenditure, which has a multiplier impact on all sectors of the economic growth.

Aggarwal also pointed out that the rural economy is witnessing an uptick with good prospects of monsoon rainfall. In his view, “If the government is going to come out with some incentives for the rural economy, it will be good for the automotive industry and the overall economy.”

Auto retail body Federation of Automobile Dealers Associations (FADA) is expecting that some measures in the upcoming budget will stimulate the industry and broader economy. It has urged the finance minister to introduce the benefits of claiming depreciation on vehicles for individuals paying income tax.

'Allowing individuals to account for depreciation will not only increase the number of income tax filers but also ignite automobile demand,' noted Singhania.

The Automotive Tyre Manufacturers' Association (ATMA) stated that there is a need to restrict import of waste tyres into India as the country is becoming a 'dumping ground' for scrap tyres. ATMA also pointed out the need for addressing the issue of inverted duty structure of tyre against its key raw material, natural rubber, on priority.

Raising the concern, ATMA Chairman Arnab Banerjee said, "The import of waste/scrap tyres into India needs to be restricted through policy measures and, if necessary, allowed only in multiple cut or shredded form."
Auto component industry body ACMA is hoping that the finance minister will reintroduce additional investment allowance provision, increase depreciation rates on plant and machinery from 15 percent to 25 percent and rationalising goods and services tax rates on EVs and its components. ACMA President Shradha Suri Marwah believes that schemes such as the PLI (Production-Linked Incentive Scheme) have been of great support to the automotive industry, and we are hopeful that such measures will be continued.”

It may be recalled that in the Union Budget 2023 )announced on 1st February), the Finance Minister announced that the central government would set aside money for its 20-year-old vehicles to be scrapped. She said that states would receive assistance in upgrading outdated cars and ambulances. It also eliminated customs duties on capital goods and machinery used to produce lithium-ion batteries for use in electrically powered vehicle batteries (EVs).

Society of Indian Automobile Manufacturers, SIAM, Automotive Component Manufacturers Association of India ACMA, the Federation of Automobile Dealers Associations, FADA,  Automotive Tyre Manufacturers' Association ATMA