With the global meltdown in their rear view mirror and revved up by the three fiscal stimulus received from the Government of India in late 2008 and early 2009, the Indian Automotive Industry has surged out of its past slump and outperformed most of its peers across the world in year-on-year (YOY) production growth.
According to CSM Worldwide, Inc - Jan 2010 forecast, the industry ranked third in the world and second among BRIC countries in YOY growth in the light vehicles production indicating a recovering and growing industry. To retain this level of growth in production, the domestic and international markets should sustain the high levels of consumerism displayed by both individuals and corporate alike.
However, in the current scenario of rising costs of raw materials and high rates of interest, continued consumer demand for automobiles and automobile components looks slim. Although car sales in India have surged 32 percent in January 2010, industry analysts believe the rise in sales is the result of fear that the Government would roll back tax cuts in the upcoming budget.
A rollback of the 4 percent duty cut provided for small cars (8 to 12 percent) and big cars (20 to 24 percent) added to a fear of Service tax and CENVAT hike of 2 percent, individually, threatens to increase vehicle prices from Rs. 5,000 to Rs 1,00,000 or more depending on the price of the vehicle. This fear of withdrawal of stimulus package, increase in taxes (Service tax and CENVAT) and the unavoidable subsequent push up of prices has placed retention of the current duty structure on automobiles, auto components and fuel as the Auto Industry's top priority in its wish list for the upcoming budget.
The Auto Industry's wish list for Budget 2010 also includes:
* Reduction of import duty and excise duty on hybrid cars, and incentives for development of technology for hybrids
* Excise duty on diesel driven trucks / lorries to be bought at par with excise duty on petrol driven trucks/ lorries, which had been reduced to 8 percent from 12 percent in the 2009 interim budget
* Creation of Special Auto Component parks (based on the concept of Industrial Parks) with additional Direct tax and Indirect tax benefits aimed at reducing manufacturing costs enabling the Indian auto component manufacturers to compete at the international markets
* Making interest payments paid on auto and two wheeler loans eligible for income tax deduction (under Section 80C of I-T Act) to increase consumer demand
Overall, although no radical measures have been proposed, keeping in mind the 16 year high fiscal deficit of 6.8 percent of the GDP to be addressed by the Finance Minister, even a partial retention of current excise duty structure and granting of other stimuli would assist the sector in retaining its growth from a short term perspective
Source : sify.com