Union Budget 2019 India: Government's intent to set up mega factories for semi-conductors and electronics is excellent. All over the world, these factories are huge.
Budget 2019 India: The biggest positive that has happened in this Budget is the likelihood of better availability of finance and string likelihood of rates coming down. Today, it is not that there is no demand but a good number of people are not getting the financing. Hence, if financing is made easily available, it will make a huge difference.
Increase in fuel prices is something that, if it affects me directly, I would wish it didn’t happen, but one has to look at it holistically and see what else could have been done. Given the fact that the revenue estimates are lower, it has to come from somewhere. Now, the FM chose two avenues of revenue generation — one was to tax the super-rich more and the other was to increase the excise duty on petrol and diesel. I think, perhaps out of all the things that could have been done to do away with revenue deficit, the least disruptive is the fuel price increase. The impact on auto demand because of `1 will not be too much.
Regarding benefits of income tax for EV buyers, what is not clear to me is whether this will only benefit personal buyers or also benefit fleet buyers. Otherwise, as an industry we could not have asked for more. Though there is never enough, now it is upto us and other players to make this EV dream a reality. Mahindra’s strategy has always been very aggressive and we do not need to change anything because of the Budget. We have been counting on EVs becoming big in India. EV is a one time opportunity and India should become a hub for EVs for emerging markets.
Government’s intent to set up mega factories for semi-conductors and electronics is excellent. All over the world, these factories are huge. Without the scale, these commodities cannot be completed. And we need to stretch beyond our current visible demand to create capacities for some of these things.
Demand will come after capacity is created. We don’t need to wait for demand to create capacity and therefore it will be very difficult for a company to create capacity ahead of demand because they do have to worry about their return on their investment and therefore the government may need to step in to provide some kind of viability gap to create mega factories.
The economy has to grow at 7% and for that is there enough in the Budget to spur demand? Well, that is the only question mark in my mind. We have to come out of the demand down cycle to demand upcycle everything will fall in place.
(The author is managing director, Mahindra & Mahindra)