As far as automotive industry is concerned, demand for two-wheelers will see a direct impact as compared to four-wheelers lll
I think clearly Rs6,000 a year, especially for farmers who have under two hectares of land doesn’t directly affect sales of agri equipment because these are not the farmers who buy tractors or equipment. These farms are too small to justify that.
But for these farmers, Rs6,000 is significant amount of money. It forms almost 8-10% of their annual income and this money will probably go into buying better or more agri inputs which will increase their output.
So, it might effect FMCG industry positively indirectly.
But what it will do for us is that the overall sentiment in villages will improve and these kind of things have positive psychological impact, and therefore right now, when the farm sentiment is subdued, this clearly would create cheer and that will help undoubtedly.
The farmer package was expected. But it applies to farmers with land holdings and not landless farmers. So, about half the people benefit from it and the remaining half gets left out.
That is prudent because in no way one could have expected an outlay covering everybody. It’s good that Rs75,000 crore gets spent on this.
Two positive surprises for me are that despite Rs20,000 crore which got added to the expenditure this year for farmers’ package, the fiscal deficit remains at 3.4% and does not become 3.6% or 3.7% and also for next year, the fiscal deficit remains at 3.4%.
As far as the automotive industry is concerned, the money going in the pockets of people earning less than Rs5 lakh, and especially the amount being of the order of Rs5,000-6,000, might have a direct impact on two-wheeler sales, but will not have a direct impact on four-wheeler sales.
And if I am to look at what I look forward to from the regular Budget, which will come next, for the automotive industry, the first is to not do anything till BS-VI happens.
We are all busy meeting BS-VI, so nothing new should be thrown on the table.
Further, to help us in the transition to BS-VI in a smooth manner, which means 100% stoppage of BS-IV production and 100% ramp up of new production, we need certainty on availability of BS-VI fuel.
From January 2020, BS-VI fuel has to be made available throughout the country for us to be able to manage this transition.
Because from that date, we have to start selling BS-VI vehicle in small quantity. So if the fuel comes on April 1, 2020, we will not be able to manage it. Fuel has to come latest by January 1, 2020. We hope there’s no last minute change of date, for instance if on March 29 or 30, they announce that fuel is not ready and therefore the auto industry is given three more months, it will not help.
Because our supply chain will be planned latest by October. After October, we cannot increase the number of BS-IV, nor can we delay the introduction of BS-VI.
The other thing is to keep the liquidity good on financing of vehicles, so if the interest rate goes down, it will certainly help.
The most positive thing that has happened to the auto industry is the GST. Probably, the auto industry has been the biggest beneficiary of the GST because it has so many forward and backward linkages and provides us the ease of doing business.
The size of our indirect tax department has halved. Further, regulation has forced us to make cleaner and safer vehicles.
-The author is managing director, Mahindra & Mahindra