Despite the finance minister not announcing a reduction in excise duty on bigger cars, the industry is optimistic that the segment would witness a positive growth of 12-13% in 2008-09, thanks to the hiked income tax exemption limit.

?An increase in exemption limit for income tax payers will enhance the disposable income which would lead to higher spending on high-end products including bigger cars,? says an auto analyst.

?Moreover, a general shift in purchase pattern from compact cars to bigger cars would further lead to the growth of bigger cars,? he says. The government has classified all passenger cars into two categories. While cars below 4000 mm with either 1200 cc petrol engine or 1500 cc diesel engine have been classified as small cars, others that are larger than 4000 mm are collectively called as bigger cars and include the likes of Honda City and Accord, Chevrolet Aveo and Optra, Hyundai Accent, Verna and Sonata.

Adds Ankush Arora, vice-president, General Motors, ?Budget 2008-09 is consumption promoting Budget. Hence, irrespective of no reduction in excise duty on bigger cars we expect the segment to grow by 10-11% in 2008.?

This growth is despite the fact that the excise as well as price difference between smaller and bigger cars have gone up substantially ever since the Budget 2006-07.

?In 2006-07, the excise duty on smaller cars was reduced from 24% to 16% and this resulted in a price difference in the range of Rs 15,000 to Rs 40,000. Now with a further drop of 4% in excise duty on smaller cars, the price gap has widened further by Rs 8,000 to Rs 20,000 depending on the models,? says Jnaneswar Sen, senior general manager (marketing), Honda Siel Car India Ltd.

?However, with several new launches expected in the bigger car segment in coming days and hoping that the inflation will remains low as well as the economy will continue to grow at around 9%, we expect the segment to grow at an estimated 14% in 2008-09,? adds Sen.

?The bigger car segment is not a very price-sensitive one unlike the smaller car segment. Hence, there would not be much impact on bigger cars and the segment is expected to grow marginally,? explains Arvind Saxena, senior vice president, Hyundai Motor India Ltd (HMIL).