Kavan Mukhtyar, Partner & Leader – Automotive, PwC India
Budget 2019 signaled the Government’s commitment to several long-term structural changes to make India a USD 5 trillion economy. There were clear areas of focus like rural and farm sector, power, infrastructure, boosting connectivity and improving quality of credit in the banking system. The Automotive industry would benefit through the Pradhan Mantri Gram Sadak Yojana with investment of Rs.80,250 crore in upgrading 125,000 km of rural road network. Doubling of farm income is another priority through a range of measures. Improved connectivity will result in rural and farmer economic development. These initiatives will have a positive impact on the commercial vehicles and tractors segment.
The Government of India has stated its clear intent to push forward the adoption of Electric Vehicles (EVs). Allocation of Rs.10,000 crore to the FAME 2 scheme, import duty exemption on EV components, additional Income tax deduction of Rs.1.5 lakhs on interest paid on loans for buying EVs will activate demand for electric vehicles. However, sustained growth of electric vehicles will require several other measures. Import duty increase for selected automotive components will support manufacturing in India.
The Indian automotive industry, reeling under the pressure of demand slowdown, was expecting some short-term measures for demand activation. However the Government has chosen to instead focus on structural changes that will benefit the automotive industry in the long-term