There is little that the budget is expected to do for the automobile industry, which has been hit hard by a sharp rise in interest rates over the past year.
The industry has sought a reduction in excise duty, but the demand is unlikely to find favor with Finance Minister P. Chidambaram, according to analysts tracking the sector
Currently small cars, two wheelers and commercial vehicles are taxed at 16 per cent, while big cars attract an excise duty of 24 per cent.
The government defines ‘small’ car as one with a petrol engine capacity of up to 1.2 litre or a diesel engine of 1.4 litre with a maximum length of 4 metres.
“Although the budget can do little to reduce interest rates, it is (still) possible for the government to bring down the cost of ownership by reducing excise duty rates,” said Dilip Chenoy, Director-General of Society of Indian Automobile Manufacturers.
If the minister cuts duties on at least two-wheelers, he will be touching the lives of 8 million buyers that this segment draws every year, Chenoy said.
Two-wheeler sales have seen negative growth through the current fiscal year, while car sales continue to grow, but the pace is slowing down. There are some areas, though, where a statement of intent could help, he said.
The automobile industry is keen on government provide incentives to phase out of old commercial vehicles and passenger cars. This will not only boost demand, but also have an impact in reducing the emission levels.
Also in terms of policies, the automobile industry hopes the government to provide incentives to the industry to achieve the targets set up in the Automotive Mission Plan. The Plan envisages auto sector investments of $40 billion through the decade ending 2016 with the aim to making India a global automobile player in the next decade.