Budget 2020: As Prime Minister Narendra Modi's government prepares to present the first budget of its second term on 1st February, there has been a significant transformation in India's economic landscape from the time the first budget was presented, just seven months ago.
India's vision of becoming a $5 trillion economy by 2025, while seemingly difficult to attain given the current state of the economy, is still very much in the realm of possibility - but only if the government chooses to make long-term and audacious economic policy reforms, starting now.
The automotive sector is almost half of India's manufacturing economy, which accounts for about one trillion dollars of the 2025 vision, and is therefore critical to the country's economic success.
While the economy as a whole has been impacted due to the ongoing slowdown, the automotive industry has seen more impact as a result of changes in economic policies and regulations in a very short period of time.
FULL COVERAGE:Union Budget 2020
Bold measures are indeed the need of the hour, and the automotive sector is looking to the finance ministry to implement reforms that will revive the industry, while at the same time maintaining fiscal prudence.
Our hope is that Budget 2020 will help uplift both the consumer and industry sentiments. A GST rate cut can help improve consumer sentiment, enhance demand and also help offset additional costs that would creep in from the implementation of BSVI emission norms.
Another welcome step would be a uniform 18% GST on auto components, thus lowering prices, and enhancing sales, creating a multiplier effect across the auto sector.
Also, the previous budget did show a certain level of commitment to the auto industry by pushing Electric Vehicles (EV) and more stringent norms like BSVI; however, what was not seen was a commitment from the government to implement the infrastructure required to actually support these initiatives.
We are very hopeful that Budget 2020 will rectify these gaps, especially with regards to reforms and incentives to help propel EV sales in India, and enable the automotive sector to build on the solid foundation laid in the previous budget.
Hybrid vehicles can be the perfect next step for the auto industry to make a smooth transition to a fully electric vehicle.
This would mean minimal disruption to the existing automotive manufacturing ecosystem, and also does not need the infrastructure to fully evolve.
Additional incentives to boost demand for hybrids in this budget would, therefore, be a welcome step.
We also need to keep in mind that the automotive sector cannot evolve and keep pace with changing consumer needs unless innovation is seen as a key priority; in fact, ACMA has recommended that the budget should include a technology development & acquisition Fund that can support R&D and indigenous technology development.
This thrust on R&D can help the automotive sector to transform the entire mobility scenario, along with supporting the government's "Make in India" initiative.
Finally, adoption of an incentive-based scrappage policy, mainly for old commercial vehicles, can help create a win-win for the entire ecosystem.
We are hopeful that the finance ministry will take into account our views; we are optimistic about Budget 2020 and the industry's long-term growth prospects in the country.
(The author is Business Director, DSM India Pvt. Ltd.)