Infra push in Budget 2018 will help the Indian auto sector: Experts

Though there is no specific mention about the automobile industry in the Indian budget, presented by the Finance Minister Arun Jaitley on February 1, 2018, the sector is poised to benefit from the government’s strong focus on boosting infrastructure and connectivity, experts point out. While high tax (GST) on the Electric Vehicle (EV) components still remains a big concern for the industry. This is at a time when the country envisages to become fully electric by 2030.

“Increased allocation of funds for roads and highways will bring positive sentiments for the auto sector by increasing demand for transport. Infrastructure development has always been prerequisite for growth and the key focus towards boosting rural economy and improving the farming sector will further spur the demand for automobile components especially for tractors and two-wheelers. With a certain focus on increase in customs duty on the auto component, we also expect a boost for the manufacturing sector,” said Rohit Saboo, President and CEO, National Engineering Industries Limited (NEI).

Reacting to the budget 2018, Nissan India, Managing Director, Jerome Saigot said that the budget is a reaffirmation of the government’s commitment to sustainable economic growth.

“The focus on building road and transport infrastructure, skill development and job creation will help in creating a positive mood in the economy. The stimulus to the agriculture and rural infrastructure will further drive consumer demand in the rural markets benefitting the auto sector and economy overall,” he hoped.

According to Vipin Sondhi, MD & CEO, JCB India, budget 2018 will provide significant impetus to the revival of growth and creation of employment.

“The budget addresses opportunities to modernise and create new infrastructure in Affordable Housing, Railways, Airports which continues the effort of the last few years. These will present favourable opportunities for growth to the Indian Construction Equipment Industry. Incentivisation to the MSME sector, which forms the backbone of industrialisation of a Nation, as also job creation is another welcome step,” he added.

Dharmesh Arora, CEO, Schaeffler India said: “There is a huge focus (in budget 2018) on infrastructure development towards road construction, railways and air travel, that bodes well for spurring economic activity in many sectors such as construction equipment, commercial vehicles in addition to core sectors. While the budget has refrained from providing any direction to the country’s automotive sector, we are hopeful that the impending EV policy will provide clarity. On the whole, we expect budget 2018 to create a positive investment climate”.

The Society of Manufacturers of Electric Vehicles (SMEV) has welcomed the budget 2018. However, Hemalatha Annamalai, South Chapter Chief, SMEV and CEO & Founder Ampere Electric Vehicle Pvt Ltd, said that high tax (GST) on the EV components still remains a big concern for the industry.

“The budget must revise the tax rate to 5% for all the EVs components. The CGT-MSE limit which is now Rs 20 million for MSME industries should have been revised to Rs 50 million. The emerging business verticals such as electric vehicles, solar, wind, renewable energies like hydrogen, ethanol etc have longer gestation unlike conventional companies, and hence, an enhanced working capital support through CGT- MSE is a must. This will support increased production volumes for scale and also bridge the GST refund timeliness,” she pointed out.

Vinod Aggarwal, MD & CEO, VECV, “Union Budget 2018-19 is pro-development and committed to the welfare of the rural economy. There is much emphasis on boosting income for rural populace and improving farming which is good news for the industry. The agri market and infrastructure allocation of INR 2000 crores will translate into demand for farming equipment and light commercial vehicles. Increase in rural credit will also have positive implications on the much needed finance penetration here.

From the CV industry perspective, we are extremely happy to see the government’s continued focus on infrastructure. With 21% more expenditure towards infrastructure and allocation of INR 5.97 lakh crores, the government is ensuring India continues to charge ahead and remain one of the fastest growing economies in the world. The FM also confirmed exceeding the highway construction target of 9000 km by end of FY18. The face of India is continuously evolving on back of improving road connectivity and the pace of urban development and Smart Cities.

All of this is positive for the CV industry, especially the construction and mining segment players. Real-estate incentives like affordable housing will also help growth of construction equipment.

However, there should also be a mechanism in place to monitor and ensure that planned budgetary expenditure is happening. Focus should be on relieving bottlenecks and ascertaining faster execution of projects.

We also support the government’s agenda of allocating INR 14.43 crores towards job creation in rural India. Government’s focus on improving quality education will also help in employment generation and creating a skilled workforce that suits the requirements of the industry.

However, there were a lot of expectations in terms of a clear policy roadmap specially focused on the auto sector. To meet the government’s 2030 target for electrification of the transport fleet, we were eager to hear some relief in the GST rate or an announcement on incentivizing R&D and fund allocation that will help the move towards FAME.

We also missed guidance on the much awaited old trucks scrappage policy. This was much needed as it will help clear pre-used truck inventory and further boost demand. It also has many positive implications on government revenue and will also help bring down pollution.

While the fundamentals are looking strong, the objective of the government should also be on strengthening core sectors to ensure this growth is sustained. It will help improve the general sentiment and facilitate spending and especially drive rural consumption.”

P Ravichandran, Chairman, CII Tamil Nadu State Council is happy with the announcement to develop two defence industrial production corridors in the country.

“This landmark announcement would pave the way for setting up the first Defence Production Corridor in Tamil Nadu, as envisaged by Minister of Defence Nirmala Sitharaman. To further strengthen the defence manufacturing ecosystem in the State, CII has proposed to the Tamil Nadu Government to bring out a Defence & Aerospace Policy and also an Aero Park in Chennai,” he said.

Yevgen Sokolnikov, CEO and co-founder, boodmo, an auto component marketplace start-up, said that increasing customs duty on the import of auto component parts will be big a dampener for the auto component marketplace, which the Finance Minister must reconsider waiving.

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