Growth-Oriented Budget to Increase Demand for Indian Auto Inc.: Here’s What Industry Leaders Feel

The government’s focus on increasing infrastructure spending, raising tax brackets for individuals, promoting green energy, and lowering taxes on EV parts bodes well for the auto industry.

The Indian government used a middle-of-the-road strategy in the most recent budget by concentrating on measures with a significant impact. As a result, the Finance Minister, Nirmala Sitharaman, made certain decisions that met industry expectations and others that fell short.

The effective provision of Rs 13.7 lakh crore, a 33% increase in capital outlay, was welcomed by Vinod Aggarwal, President of SIAM and MD & CEO of VECV. This would help to stimulate economic growth, which would have a favorable influence on the auto sector.

He further commented on the funding for various government departments to replace the old vehicles and “some lowering of effective personal income tax rates, which will help drive personal consumption.”

According to Sunjay J. Kapur, President of the ACMA, the budget is a roadmap for an Aatmanirbhar Bharat that is digitally empowered and includes policies that would quickly promote equitable and sustainable growth.

“Focus on exports, manufacturing, local value addition, and encouraging green energy and mobility are indeed steps in the right direction. Further, the proposals for personal income tax will put more money in the hands of people thus fuelling consumption and leading to economic growth.”

The component industry also welcomed the initiatives for training and research in high-tech fields like AI, robotics, 5G, Mechatronics, and 3D printing. “With increasing telematics and software content in vehicles, these measures will ensure that our industry continues to be relevant and globally competitive.”

He continued by saying that the budget also considered the difficulties MSMEs faced in meeting contractual obligations during the pandemic. In addition, continued reductions in taxes on steel inputs and copper scrap would also help to increase the supply of raw materials for the automobile industry.

According to Satish Sharma, Chairman of the Automotive Tyre Manufacturers Association (ATMA), the growth-oriented budget will give the economy’s growth trajectory a clear boost. All industry areas, including the tyre sector, which serves as the economy’s wheels and is closely correlated to economic growth, would benefit from the large 33% increase in capital expenditures, which reached Rs 10 lakh crore, the highest level ever.

Satish further added, “However, the enhancement of duty on Compound Rubber has come as a matter of concern for the industry. As such India is deficient in rubber production, both Natural and Synthetic. In fact, Natural Rubber in India attracts the highest rate of duty of 25 percent despite the fact that there is a wide gap between demand and availability and imports are inevitable. The increase in duty will lead to increase in cost of production and affect price competitiveness. In the interest of Make in India, the increase in duty on a key raw material in which India is deficient needs reconsideration.”

The aim to scrap all old government vehicles by assisting State governments will boost sales in all segments, according to Manish Raj Singhania, President of FADA, who also notes that the capital outlay of Rs 10 lakh crore towards infrastructure spending will unquestionably aid commercial vehicle sales.

“The reduction in individual tax slabs will benefit the ailing entry-level two-wheeler and passenger vehicle segment. Reduction in the highest tax surcharge from 37 percent to 25 percent will also benefit luxury vehicle sales. With a focus on electrification, relaxation on import duties of lithium-ion batteries will help in price reduction of EVs, thus making it affordable for the masses,” added Singhania.

Singhania further added, “On the business front, being part of the MSME universe, cost of credit guarantee will reduce by 1 percent thus helping auto dealers in raising funds. The budget has also focussed on ease of doing business by reducing more than 39K compliances and enabling entity-level Digi locker for storing and sharing documents.”

Dr Anish Shah, MD & CEO of Mahindra Group, also commented, saying, “This is an outstanding budget as it is disciplined, growth-oriented, inclusive and sustainable. The Finance Minister has done a commendable job by tabling a budget that is big on consistency and driven majorly by capex. The steep increase in capex, to the tune of Rs 10 lakh crore, will ensure the continuum of cyclical recovery.”

Dr Shah further said, “Capex spending is good because it has a higher multiplier effect: every rupee spent on capex has a multiplier of Rs 3 as compared to just about Rs 0.9 for revenue expenditure. That apart, higher capex also creates jobs in the hinterland. The focus on core infrastructure, including increased funding for railways and clean energy, as well as the government’s ambitious plans for the agricultural sector, will help to improve rural incomes. Above all, it is encouraging to see the government setting the pace for climate action by announcing a ‘green budget’ that will pave the way for a greener, cleaner planet.”

The Budget 2023, according to PB Balaji, Group CFO of Tata Motors, is well-rounded and realistic and gives the car industry—which has been rebounding from the pandemic—further momentum while also turbo-charging investments. Strategically, the budget calls for a massive increase in capital spending of 33% to Rs 10 lakh crore, which would give India more momentum toward becoming a globally competitive economy. This budget’s distinguishing element would contribute to private sector investments, economic expansion, job creation, and structurally lower long-term inflation. It would also incentivize additional infrastructure investment to extend the 50-year loan to state governments without interest for another calendar year. The increased investments directly affect and significantly benefit Tata Motors’ Commercial Vehicles business.

He continued by saying that the nearly Rs 55,000 crore investment in energy transition and the National Green Hydrogen Mission for a low-carbon and green economy, as well as the customs duty exemption on importation of capital goods and equipment needed for the production of lithium-ion cells for batteries used in electric vehicles, are forward-thinking and positive steps. In addition, reduced excise taxes on blended CNG will lower the price of operating a CNG vehicle. It also bodes well for the auto sector and will reduce carbon emissions from earlier-generation vehicles if sufficient funds are allocated to dismantling old Central and State Government vehicles.

These actions will energize this emerging economy and reaffirm the government’s commitment to achieving net zero carbon emissions by 2070. These measures bode well for our company, given Tata Motors’ dedication to environmentally friendly transportation. The transition to a greener future is aided by it. Overall, this assured, an expertly balanced budget would boost spending, draw in investments without triggering inflationary fears, increase investor confidence in India’s sustainable economic story, and move the country swiftly closer to achieving “Amrit Kaal.”

He said, “While doing so, the government has aimed at a fiscal deficit target of 5.9% for the upcoming year with a clear glide path to bring the fiscal deficit below 4.5 per cent of GDP by 2025-26. The budget not only focuses on inclusiveness, youth empowerment, and skill development but also aims to give impetus to ‘Green Growth’ with sufficient outlays for supporting the recently announced National Green Hydrogen Mission, doubling of allocation for FAME 2 scheme, and providing viability gap funding for Battery Energy Storage System (BESS).”

He applauded the government’s decision to scrap old vehicles, which will help new vehicle sales further.

According to Dheeraj Hinduja, Executive Chairman of Ashok Leyland, the budget emphasizes the expansion of the digitalization of the economy and the building of a comprehensive national infrastructure. “The road transportation sector plays an important role in national development and would have an even more impactful role. The announcement that old vehicles owned by the central government and state governments will be replaced as part of the vehicle scrapping policy presents a significant opportunity for fleet modernization. This budget also echoes our sentiment and commitment to clean energy vehicles for a cleaner and greener future, as part of a national mission to achieve the net zero carbon emission goal.”

Nirmal K. Minda, Chairman, and MD of Uno Minda , praised the budget’s emphasis on encouraging consumption as well as capital expenditures. “It also offers steps to boost domestic manufacturing and encourage green energy, and mobility. The announcement of Rs 35,000 crore fund to support green projects will give a massive boost toward India’s net zero goals. Additionally, the Green credit programme, will further encourage responsible companies to take more environmentally sustainable and responsible actions.”

Minda further added, “All these steps are also going increase the jobs in these sectors. We are particularly encouraged by the push that the budget is likely to give to the auto sector in the form of a Vehicle Replacement policy which will allow States to replace old polluting vehicles. This will, in turn, benefit auto sales and electric vehicles.
We look forward to understanding the FM’s proposal to reduce basic customs duty on some goods from 21% to 13%, including lithium-ion cell batteries used in EVs.’

TVS Motor Company’s MD, Sudarshan Venu, commented that the budget was well-balanced. “The Finance Minister has put inclusivity, capital expenditure, consumption, digitization and the middle-class front and centre. The emphasis on increased infrastructure spends and support for lithium-ion battery manufacturing will be a great multiplier for the industry overall.”

Mahesh Babu, CEO of Switch Mobility, said in a statement, “The government’s focus on infrastructure with enhanced capex of Rs 2.7 lakh crore for roads and highways and the budgetary allocation for vehicle scrappage, will certainly accelerate the growth of the CV market in India. Meanwhile, in the EV sector, the government’s move to provide customs duty exemption for the import of specified capital goods and machinery required for the manufacture of lithium-ion cells for batteries is a welcome move, that will play a vital role in making local cell manufacturing cost competitive in the long run. Additionally, green growth is one of the top 7 priorities, with an allocation of INR 35,000 crore, is a step in the right direction. This will not just aid economic growth but will also accelerate the growth of the auto industry, especially EVs, as the country transitions towards net zero by 2070.”

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