Budget Analysis: FM has done his best within constraints, says Pawan Goenka

Pawan Goenka, president Automotive & Farm Equipment Sector, Mahindra and Mahindra Ltd (M&M), talking to CNBC TV18, says that he is happy that there are not too many populist measures in the Budget nearing an election year. But he feels let down that the government had earlier indicated that the national mission of electric mobility is something that it is going to focus on and also, there was no incentive given for electric vehicles.

Here are edited excerpts of the discussion Q: What are your initial thoughts on what this Budget will mean for India Inc as a whole and also on the auto sector? Do you think growth will slow further because of this hike in excise duty that is coming in, particularly for SUVs? A: There are a lot of negative comments being made about the Budget. Lots of good things have been said and I think the most important thing the FM said in the end that February 28 is one day in the life of the nation, and tomorrow life goes on.
What we need to look at is what the intent is. He clearly said that growth cannot be compromised with. He has clearly mentioned that there are three constituencies - women, youth and the poor that we have to work on, and he has done things for that. If one was expecting a big-bang announcement in the Budget, no, that didn’t happen. He said - ‘I am constrained from both sides, I cannot reduce spending too much, I cannot increase taxes too much.’ Non-planned expenditure has not gone by much - 14-15 percent, and the planned expenditure has gone up by 33 percent. That is very good news. I do not think that there are too many populist measures that he has put down in an election year. Overall, I think done the best that can be done within constraints that exist. So I am not negative on the Budget overall. Coming to the auto industry, I think everybody expects me to be very upset because of SUV tax increase. Let me put that into perspective. First of all, my disappointment was because of some things that did not happen. There was a very strong indication given by the government earlier that the national mission of electric mobility is something that it is going to be focusing on. There was no incentive given for electric vehicles, which we were hoping would happen in this Budget. There was talk of diesel tax, which also did not happen. So that is good news. We have always said that there is no justification for it. Then a surprise came on 3 percent SUV tax. My disappointment is not so much that there is 3 percent tax. If the government feels that is the right thing to do for the economy, so be it. My disappointment is on the criterion that has been selected for deciding which vehicles get taxed more. The criterion is 170 mm ground clearance, and the vehicle has a higher ground clearance gets taxed. I fail to understand totally how a higher ground clearance is a demerit. If anything, higher ground clearance is good. In fact, you should reduce tax in higher ground clearance. I absolutely fail to understand that. It totally distorts the market dynamics. In the same customer base, same vehicle or same type of vehicle, one vehicle could be 168 mm, one could be 172 mm and you suddenly increase the price by Rs 30,000 for these vehicles, which creates a totally unjustified, uncalled for competitive disadvantage or advantage to one vehicle. Q: After what you heard in this Budget, would you either increase or decrease the guidance that you have set out in terms of growth for the auto sector and the company? A: There is very little that I can say will make a significant impact on the industry. The Budget is somewhat growth-oriented and that is something that we had built in in our estimate. There is a dampener that has happened on SUVs, but in the overall scheme of things for the auto industry, it probably will not have much of an impact. If anything, there will be a demand shift. I would also hope that once the ministry realises that this 170 mm is a very uncalled-for thing, maybe they will make some correction.  I will not expect much of a change to happen in the projection that we have for the industry.