The Asian Age

No big bang effect for auto sector

- S. Viswanatha­n

There is no big-bang impact that will affect the fortunes of the auto sector that one could glean from the finance minister’s pronouncem­ents in Parliament as she presented the Budget for 2020-21.

Perhaps this was to be expected as the indirect tax impact on the fortunes of any industry is now dictated by the GST council and the setting of GST rates is not a Central budgetary exercise unlike in an earlier era where excise duty rates were set by the Central budget and sales tax rates were set by the State Budgets.

One of the key issues facing the auto sector is the lack of demand for its products partly weighed down by high GST rates ranging from 28 pct to 50 pct based on the size of the vehicle and engine capacity.

To kickstart demand the government needs to put more money in the hands of the consumer to buy automotive products. This has been achieved in part by the rationalis­ing of income tax rates and slabs.

To compensate for the revenue loss from tax rationaliz­ation measures, the government has decided to deepen its efforts towards privatizat­ion – the part sale of the Life Insurance Corporatio­n of India must be viewed as such. But this will have the beneficial impact of not allowing money market interest rates to move in an upward trend as the need by the government to borrow money from the markets will be lessened to that extent.

The allocation of `18,600 crores of a suburban train project for Bangalore will impact the auto sector favorably by decongesti­ng parts of the city that will allow for freer movement of vehicles and hopefully then help demand.

Moreover, developmen­t of 2,500 km access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways will boost further investment­s into the auto sector.

Finally, what the government could have done for the auto sector was to have announced some provisions for a vehicle scrappage fund which would in turn help create demand for new vehicles, decongesti­ng the roads and help with local pollution by taking old vehicles off the roads.

 ??  ??

Newspapers in English

Newspapers from India