The government on Friday took the first step towards exiting the stimulus packages rolled out to help industry tide over the global economic slump of 2008.
Excise duties on all non-petroleum products were increased from 8 per cent to 10 per cent. This will lead to a hike in prices of cars, motorcycles, scooters, air-conditioners, washing machines and refrigerators.
“The improvement in our economic performance encourages a course of fiscal correction even as the global situation warrants caution,” said Finance Minister Pranab Mukherjee in his speech. “I propose to partially roll back the rate of reduction in central excise duties and enhance the standard rate on all non-petroleum products from 8 per cent to 10 per cent ad valorem.”
After the announcement, the automobile industry increased the prices of cars in the range Rs 3,000-30,000. Effective from the midnight of February 26, a Hyundai i10, for example, will be costlier by around Rs 6,000. For motorcycles and scooters, the increase is between Rs 500 and Rs 1,200.
“Considering that the increase is not that much, there may not be a long-term impact on growth,” said Arvind Saxena, director (sales and marketing), Hyundai Motor India Ltd. “An increase was expected (and) so consumers had advanced purchases - that resulted in high volumes in January and February.”
The cost of building a house will go up with the increase in excise duty on cement, a key raw material in construction.