An excise duty cut in the auto sector will see some resurgence in demand, feels Godrej Group chairman Adi Godrej.
Rajiv Memani, Country Managing Partner, EY India, feels the cut won’t be an insignificant amount, and will translate into around 3-4 percent reduction in most cases.
Though both Memani and Godrej rate the Interim Budget, presented by Finance Minister P Chidambaram, as positive, they feel the government should have been stronger on the execution side.
“I only wish this government had implemented some of the things they have in the last year or so, couple of years before that then our economy would have been in very good shape,” said Godrej.
Memani said: “The execution on the ground was not as strong, so I don’t think people felt it. I think he (Chidambaram) has taken this opportunity to lay down his vision or UPA’s vision of the future and that is always a good thing to do.”
According to former SIAM Chairman, S Shandilya, though it is positive for the sector and may boost the demand, yet it is a temporary measure as it is meant only till June.
“We need to ensure that the incoming government also kind of maintains it otherwise it is very difficult,” he said.
“However, having said that the reduction is far more than what we expected which is a positive thing in all segments, CVs, cars, two-wheelers and also in the case of capital goods, which is again good, commercial vehicles, which is positive. However, the fundamental thing is economy should grow,” he added.
Below is the interview of Adi Godrej, Rajiv Memani and S Shandilya with Shereen Bhan on CNBC-TV 18.
Q: How would you rate the Interim Budget?
Godrej: I think his speech was excellent. I only wish this government had implemented some of the things they have in the last year or so, couple of years before that then our economy would have been in very good shape.
Q: Do you believe the excise cut will spur demand across the board cuts as far as the auto sector is concerned from 12 percent to 8 percent on SUVs, on large cars, on mid-sized cars, on small cars and even as far as capital goods is concerned from 12-10 percent, do you believe that we are likely to see a resurgence in demand on account of the excise cut?
Godrej: There will be some resurgence in demand whether it will be as much as one could desire or not is difficult to tell but because the excise duty cuts in certain cases are only for a period of time, especially in autos that work because people buy what they want to when the excise duty is low, it should work in my view. But I am not an expert on the auto industry.
Q: Were you surprised? In the morning when we were having a conversation the sense was that clarificatory announcements at best as far as indirect taxes are concerned, auto he has gone ahead and done it, capital goods he has gone ahead and done it and even as far as service tax is concerned, two specific sectors he has made some announcements?
Memani: I think most people were quite hopeful that he would do something in auto. I think it has been a material, I don’t think it is insignificant amount of reduction in most cases, I think it will be about 3-4 percent. I would break this entire budget into four parts. First one was where he has captured what they have achieved in a very graphical manner over the last ten years and I think it is when you look at the numbers and statistics, they are impressive. I completely agree with Adi Godrej that in the last two-three years, the execution on the ground was not as strong so I don’t think people felt it. I think he has taken this opportunity to lay down his vision or UPA’s vision of the future and that is always a good thing to do.
Q: You should be a very happy man today because this is what you were asking for unfortunately didn’t happen under your tenure, it is happening under Mr Kirloskar’s tenure but nevertheless it is good news as far as the auto sector is concerned?
Shandilya: It doesn’t matter under whose tenure it happens, whenever it happens, it is nice but the only factor we should consider obviously he could not do it permanently, it is only till June. We need to ensure that the incoming government also kind of maintains it otherwise it is very difficult. However, having said that the reduction is far more than what we expected which is a positive thing in all segments, CVs, cars, two-wheelers and also in the case of capital goods, which is again good, commercial vehicles, which is positive. However, the fundamental thing is economy should grow.
Q: Do you believe that all this is actually going to do is prepone demand?
Shandilya: Absolutely, so next three weeks there will be some boost because it will be advancing the sales because people feel that what will happen till June is uncertain, there must be certain amount of certainty on that. Having said that, if the economy grows, some steps are taken in the mining sector, in the case of road sector unless we have major expenditure coming on the infrastructure.
Watch video for full interview
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