The eyes of the whole country are on the Union Budget 2023-24, which is set to be announced on 1 February by Finance Minister Nirmala Sitharaman. Just like every sector in this country, the automobile sector has big hopes from this year’s Budget. According to Statista, India has had over 295 million registered vehicles since 2019. The country is among the largest automotive sectors in the world. In 2022, it was the largest producer of two-wheelers in the world. Over 13 million units of two-wheelers were sold in the domestic market last year.
Here are some of the expectations that the automobile sector has from Union Budget 2023-24:
Extension of subsidies for EVs to promote electric mobility
The extension of subsidies for electric vehicles (EVs) under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) II scheme was sought by the Society of Manufacturers of Electric Vehicles (SMEV) on Tuesday. SMEV also wants the inclusion of light to heavy commercial vehicles under FAME II to encourage electric mobility. The industry body also demanded a uniform 5 per cent Goods and Services Tax (GST) on spare parts for EVs in its pre-Budget recommendations.
SMEV stated that the market trends imply that e-mobility, especially electric two-wheelers (E2W), carries a potential to continue growing after it reaches 20 per cent of the two-wheeler market.
Making India trade surplus economy by encouraging exports
“Aatmanirbhar Bharat” and “Make in India” schemes were introduced with the aim of eradicating import dependency. These schemes intend to make India a trusted supplier in the international market. According to a report by the Times of India, the government work on implementing phased manufacturing programs to decrease exports and grow exports.
The report added that in order to propel indigenous manufacturing ahead, the automobile industry wants the following relaxations:
- Changing the way of computing duty drawback to Free On Board (FOB) value basis from weight basis for incentivizing lightweight fuel-efficient products.
- India also needs to pursue more free trade agreements (FTAs) and reduce tariffs to allow auto players to penetrate large overseas markets.
- Rise in All Industry Rate (AIR) of duty drawback and rate of Remission of Duties and Taxes on Exported Products (‘RoDTEP’).
Impact on Commercial Vehicles
Jinesh Gandhi, Deputy Head of Research & Auto Analyst, Institutional Equities, at Motilal Oswal Financial Services (MOFSL), told Moneycontrol about his expectations for the commercial vehicle (CV) category. Jinesh stated that indirect measures by the government can impact the automobile sector, both positively and negatively. According to him, an increase in the allocation for infrastructure spending could positively impact the CV category.
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