The Indian automobile sector has been hit hard by a slowdown stemming from multiple challenges such as an increase in total cost of ownership because of mandatory long-term insurance and implementation of safety regulations, tight liquidity conditions affecting retail loans and a moderation in economic activity before the just-concluded general elections.
Measures in the Budget to boost economic activity, improve rural sentiment and add to disposable income (direct tax cuts) could go a long way in reviving consumer sentiment, as would other measures to ensure financing becomes easier.
While GST rates are now no longer part of the Budget process, the GST Council could consider changes to rates during this period. For long, the auto industry has been pressing for a cut in GST to 18 percent from 28 percent. If that materialises, it could boost auto demand by lowering prices.