The government of India in the last Budget to the run-up to the election has taken a middle-approach by focussing on high impact decisions. Nirmala Sitharaman, the Finance Minister’s some moves went well with the expectation of industry, and some missed their mark.
Vinod Aggarwal, President, SIAM and MD & CEO, VECV, welcomed the 33 percent increase in capital outlay with an effective provision of Rs 13.7 lakh crore, which would help spur growth in the economy resulting in a positive impact on the auto sector.
He also commended the funding for various government departments for the replacement of old vehicles and “some lowering of effective personal income tax rates, which will help drive personal consumption.”
Sunjay J Kapur, President, ACMA stated that the budget was a blueprint of a digitally enabled, Aatmanirbhar Bharat, coupled with measures that will drive sustainable yet inclusive growth at a rapid pace.
“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 leading to economic growth.”
The component industry welcomed the measures for skilling and research in hi-tech areas such as AI, Robotics, 5G, Mechatronics and 3D printing, among others. “With increasing telematics and software content in vehicles, these measures will ensure that our industry continues to be relevant and globally competitive”.
He further stated that the budget also took into account the assuage challenges faced by MSMEs due to failures of execution of contractual obligations during the pandemic. In addition, continuation of reduced duties on copper scrap and inputs for steel would further help improve availability of raw materials in the automotive sector.
Satish Sharma, Chairman, Automotive Tyre Manufacturers Association (ATMA) stated that the growth-oriented budget will impart a definitive push to the growth trajectory of the economy. Especially the significant 33 percent hike in the capex outlay at Rs 10 lakh crore, the highest ever, will be a boost for all segments of the industry including the tyre sector which, as wheels of the economy, is tied to the economic growth directly.
“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.”
Manish Raj Singhania, President, FADA states that the capital outlay of Rs 10 lakh crore towards infrastructure spending will definitely aid commercial vehicle sales, the aim to scrap all old government vehicles by aiding State governments will boost all segment 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,” said Singhania.
“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 then 39K compliances and enabling entity level digilocker for storing and sharing documents,” added Singhania.
Dr. Anish Shah, MD & CEO, Mahindra Group stated “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.”
“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,” added Dr Shah.
PB Balaji, Group CFO, Tata Motors founds that the Budget 2023 is a well-rounded and pragmatic, which provides further impetus to the auto industry that has been recovering post the pandemic while also giving turbo-charging investments. Strategically, the budget envisages a whopping increase of 33% in capex outlay to Rs 10 lakh crore which would provide further impetus to India for becoming a globally competitive economy. This defining feature of the budget would have a cascading effect on private sector investments, economic growth, employment generation and structurally lower long-term inflation. Continuing the 50-year interest free loan to state governments for one more year would also encourage further investment in infrastructure. The stepped-up investments have a direct bearing and a significant positive for Tata Motors Commercial Vehicle business.”
“He further explained that the outlay of almost Rs 55,000 crore towards energy transition and National Green Hydrogen Mission for a low carbon and green economy and customs duty exemption on import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles are progressive and welcome moves. The excise duty cuts on blended CNG will help reduce the cost of running a CNG vehicle. Additionally, adequate fund allocation towards scrapping old central and State government vehicles will drive replacement demand and augurs well for the auto industry whilst bringing down carbon emissions from older generation vehicles. These steps firmly reiterate the government’s commitment and vision to achieve net zero carbon emissions by 2070 and will galvanize this nascent industry. Given Tata Motors’ commitment to green mobility, these interventions augur well for our business. It is a helping hand to transition to a greener future. Overall, this confident, finely balanced budget will spur consumption, will crowd-in investments without raising inflationary fears and build further confidence amongst global investors in India’s sustainable growth story and take rapid strides towards achieving ‘Amrit Kaal’.”
Vikram Gulati, Country Head and Executive VP, Toyota Kirloskar Motor Given the fact that there is an outlay of Rs 10 trillion towards Capex which represents 3.3% of the GDP, a 33 percent YoY increase will contribute to robust economic growth.
“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 which 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 for providing viability gap funding for Battery Energy Storage System (BESS).”
He welcomed the government’s move to scrap old vehicles, which will further aid new vehicle sales.
Dheeraj Hinduja, Executive Chairman, Ashok Leyland stated that the budget emphasises comprehensive national infrastructure development and expands on the digitisation of the economy. “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 modernisation. 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, Uno Minda said lauded the budget’s focus on capital expenditure as well as promoting consumption. “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 towards India’s net zero goals. Additionally, the Green credit programme, will further encourage responsible companies to take more environmentally sustainable and responsible actions.”
“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 Vehicle Replacement policy which will allow States in replacing 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 percent to 13 percent, including lithium-ion cell batteries used in EVs,” added Minda.
Sudarshan Venu, MD, TVS Motor Company stated that the budget was well rounded. “The Finance Minister has put inclusivity, capital expenditure, consumption, digitisation 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 industry overall.”
Mahesh Babu, CEO, Switch Mobility “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 import of specified capital goods and machinery required for 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 being 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.”
Image courtesy: Bosch