Budget 2019 India: The absence of any guidance on the scrappage policy was a missed opportunity, given the automotive industry has been facing headwinds.
Union Budget 2019 India : The government’s higher outlay for the rural sector, with a thrust on rural income and better road connectivity, is a positive for the automotive industry. With the formalisation of the FAME II scheme (Rs 10,000 crore allocation) and announcement of further incentives, the government has re-affirmed its commitment to the EV segment. The segment would get a boost with the reduction in GST rates (from 12.5% to 5%) and tax incentives (interest deduction of Rs 1.5 lakh). The reduction in customs duty on select EV components and steps to create domestic lithium ion battery capacities auger well for the creation of a local supply ecosystem.
The CV sector will reap the benefits of the continuing focus on infrastructure development through projects like Bharatmala, Sagarmala, DFC, Jal Marg Vikas, etc. Besides, the government’s thrust on segments like rural road development, affordable housing, etc. augur well for demand in the M&HCV segment. Upgrade of the rural road network, and the resultant improvement in last-mile connectivity would also act as a demand driver for the LCV segment in the medium term. The steps to improve credit availability through additional recapitalisation of PSU banks and liquidity support to NBFCs is a significant positive.
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The absence of any guidance on the scrappage policy was a missed opportunity, given the automotive industry has been facing headwinds. The increase in fuel prices by `2 per litre is a deterrent in the otherwise positive budgetary proposals for the automotive industry.