Key industry bodies within the automotive sector have enthusiastically approved the Indian Union Budget for FY 2024-25. The Budget's focus on economic growth, infrastructure development, support for MSMEs, and comprehensive skilling initiatives, is anticipated to drive substantial growth and innovation in the industry.
SIAM Lauds Infrastructure & Rural Development Focus
Vinod Aggarwal, President of the Society of Indian Automobile Manufacturers (SIAM) and MD & CEO of VECV, expressed his approval of the Budget's continued emphasis on economic growth. He highlighted the liberal allocation of INR 2.66 lakh crore for rural development and infrastructure as a significant step towards boosting the rural economy, which, in turn, is expected to have a positive impact on the automobile industry.
SIAM welcomed several key budget proposals, including measures for skilling and up-skilling, manufacturing and employment generation support, and backing for MSMEs. Notably, the exemption of customs duty on importing critical minerals such as lithium and cobalt, along with the extension of concessional customs duty on lithium-ion cells until March 2026, are seen as pivotal steps to support the growth of the electric vehicle (EV) ecosystem. Additionally, the withdrawal of the 2% Equalisation Levy on e-transactions is expected further to propel the growth of the Indian auto industry.
ACMA Emphasises Inclusive Growth
The Automotive Component Manufacturers Association of India (ACMA) appreciates the focus on inclusive growth, infrastructure, ease of doing business, and enhanced capital expenditure. Shradha Suri Marwah, President of ACMA and CMD of Subros described the Budget as a blueprint for 'Viksit Bharat,' driving sustainable yet inclusive growth, especially within the manufacturing industry.
Marwah highlighted the support for MSMEs through the Credit Guarantee Scheme and credit support during stress periods as crucial measures. The abolition of the angel tax for start-ups was also praised for its potential to encourage innovation and entrepreneurship. Reducing customs duty on critical minerals to nil is also expected to boost cell manufacturing in India, contributing significantly to the evolving EV ecosystem. Measures to facilitate higher participation of women in the workforce were also welcomed as steps towards fostering inclusive growth and gender diversity in the automotive value chain.
FADA Highlights Optimism & Challenges
Manish Raj Singhania, President of the Federation of Automobile Dealers Associations (FADA), acknowledged the blend of optimism and challenges presented by the Budget for the auto retail sector. He praised the Budget's comprehensive approach towards inclusive growth, focusing on 'Garib', 'Mahilayen', 'Yuva', and 'Annadata'. Enhancements in Minimum Support Prices for major crops and the launch of Phase IV of the PM Gram Sadak Yojana are expected to boost rural incomes and improve rural connectivity, potentially increasing rural auto sales.
Singhania emphasised the relevance of the Budget's focus on employment, skilling, MSMEs, and the middle class for the auto retail sector. The Employment Linked Incentive scheme and the enhancement of Mudra loans were seen as positive developments supporting job creation and entrepreneurship, enhancing consumer spending power. Significant infrastructure investments, with an INR 11.1 lakh crore allocation for capital expenditure, are expected to benefit the auto sector through improved logistics and enhanced consumer experiences.
Adjustments in personal income tax, including increased standard deductions and relief for salaried employees and pensioners, were also welcomed for their potential to boost disposable incomes, fostering a more favourable environment for auto sales. However, Singhania noted the importance of effectively implementing these policies and continued government support to address challenges such as the transition to green mobility and the need for sustainable practices.
Tyre Industry Optimistic About Growth Prospects
Arnab Banerjee, Chairman of the Automotive Tyre Manufacturers Association (ATMA), expressed support regarding the Budget's focus on infrastructure, manufacturing, and skilling. He highlighted the link between the tyre sector's fortunes and the country's economic and infrastructure growth. The allocation for rural development is expected to boost the rural economy and increase demand for two-wheelers and entry-level cars, subsequently benefiting the tyre industry.
Banerjee also noted the significance of the government's commitment to infrastructure development, evidenced by the capex target for FY25 of INR 11.1 lakh crore. However, he pointed out that the industry had hoped for a reduction in customs duty on natural rubber, which remains the highest in the world. Nonetheless, the finance minister's proposal for a comprehensive review of the rate structure over the next six months provides solace.
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