To meet its long-term sustainability targets, one of India’s focal points is redirecting different industries toward green energy- and the automobile industry is no exception. The Budget is expected to provide tax incentives or subsidies for the production of electric vehicles (EVs) and hybrid vehicles, as well as measures to promote the adoption of these vehicles by consumers. Subsequently, measures to support the development of charging infrastructure for EVs are expected as well. “Given the government’s focus on clean energy, some measures can be expected to facilitate further electric vehicle (EV) adoption and to support the development of the EV ecosystem in the country. Apart from this, initiatives to support rural income would also indirectly benefit some segments within the auto industry (mainly entry-level, two-wheeler segment, and the tractor segment)” Arun Agarwal, Vice President, Kotak Securities Ltd.
Another anticipated measure is reducing import tariffs on auto components and technology to make Indian manufacturing more competitive as well as improving the overall affordability of vehicles for consumers, such as reducing GST rates or offering tax benefits. “Reduced and uniform GST rates (18%) on auto components to minimise the issue of grey operations and counterfeits due to the high (28%) GST rate,” HDFC Securities Retail Research.
Experts believe an increase in allocation for research and development, as well as for infrastructure development, will help in the overall growth of the economy and boost the demand for automobiles. “The commercial vehicle segment is another integral part of the economy, and any new investment in this area can be a boon for many businesses. The government should take the initiative to promote new investments in this segment, both on a national and local level. This can be done through providing tax breaks and other development incentives, as well as investing in infrastructure and improving transport networks. The automotive industry could use support for the scrappage policy,” Lalit Kumar Khetan, CFO of Ramkrishna Forgings Ltd.
Similarly, the Infrastructure sector also anticipates capex spending to continue in green technologies, along with public infrastructure such as roads, water, metro, railways, defence and digital infrastructure.
Furthermore, increased investment in agri-infrastructure such as establishing cold chain, warehousing, logistics, and irrigation, reducing post-harvest losses, as well as higher budgetary allocation towards construction and infrastructure also seem to be on the horizon for the industry. “In the Union Budget 2023, the infrastructure sector expects the spending on infrastructure development to go up to 10% of GDP. Increased spending will help in building assets for the future, generate employment, and circulate capital in the economy. Government spending especially in sectors like Pradhan Mantri Awas Yojana (PMAY) needs more aggression, which will benefit the lowest strata of society,” Pradeep Misra, CMD-REPL.
