Financial plan 2018: This is the thing that the car segment needs from FM Arun Jaitley

Budget 2018

Before Union Budget 2018-19, Business Standard looks at the key sectors of the economy and what they expect Finance Minister Arun Jaitley to do to improve their business in the coming financial year Complete coverage of Union Budget 2018-19: http://www.business-standard.com/budget

Key developments

In spite of a volatile regulatory environment, FY2018 has been a healthy growth year for India’s automotive industry

Industry volumes grew by about 11.3% in April-Dec on a year-on-year basis

Passenger vehicles segment rose around 8.1%, CV by around 15.2%.

Total two-wheeler market grew 11.8%, while exports grew at a healthy rate of 13%.

The automotive component industry continued to thrive due to a sharp growth in OEM demand and attractive exports growth.

Technology change and its importance have become apparent to the industry.

Safety and fuel efficiency came to the centre stage with expected regulation changes — to BSVI by 2020 being the steepest challenge

GraphIndustry ask

Demand side

Measures for employment generation: Core focus of the Budget is likely to be on employment generation led by public spend.Addressing rural distress and triggering private investments will be other key priorities.

Credit availability to rural sector: With lowering interest rate, the government is expected to take aggressive steps to manage high banking NPAs. Improving credit availability at the grassroots through rural finance programmes as well as focus on small businesses is expected.

Supply-side

R&D and tech acquisition: Facing an uphill challenge with the rapid technology shifts, the industry needs to invest heavily in R&D. An increase in weighted deduction of R&D investments will provide additional resources to the industry. The government might also consider further investments in automotive testing, validation and safety.

GST rates and compliance: The automotive industry wishes for fewer GST slabs for vehicles and streamlining of compliance processes. Automotive component GST rates may be standardised to 18%.

Push for e-mobility: The government’s commitment to promote e-mobility may be supported through the Budget by lowering the GST rate on Battery Electric vehicles (BEV) to 5%. GST rates and import duty for BEV components can also be reduced to encourage domestic manufacturing and localisation of this segment.

Kavan Mukhtyar, Partner & Leader (Automotive), PwC India

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