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Major steps to increase vehicle demand were expected by the auto industry post-demonetisation. Instead, the Union Budget 2017-18 presented in the Parliament on February 1 presented no major changes for the industry.
No changes were preferred in the current excise and service tax regime as Finance Minister Arun Jaitley said that these are going to be replaced by the Goods and Services Tax (GST). According to reports, GST rollout is likely to happen in July, three months after it was expected. As it is likely to cause major changes in the market, the auto industry will be monitoring it closely.
The reduced tax liability for the segment with an annual income between ₹2.5 lakh and ₹5 lakh to 5 percent from the current 10 is also unlikely to have a major impact on vehicle purchases.
The FAME (Faster Adoption and Manufacturing of Hybrid and Electric vehicles) scheme also saw a lack of substantial announcements or further allocations. This was a surprise to the auto industry as it was to be reviewed for implementation post March 31, 2017, and was expected to receive appropriate fund allocations for the future. A senior Toyota Kirloskar Motor official said, “We were keen to know what happens to the extension of the FAME scheme since phase one is getting over in March. To continue selling hybrid cars, the scheme was the most important thing. We need to see the fine-print to understand steps taken towards the same but it would be a dampener in case there is no continuity."
Guillaume Sicard, president, Nissan India, shared similar thoughts, “…there is nothing substantial for R&D for the automotive industry, EV and Hybrid vehicles, which is a dampener. We look forward to the implementation of GST for the automotive sector in the months to come to offer the much-needed stimulus to the auto industry and encourage buyer sentiment and consumer confidence.”
In an effort to give innovation and manufacturing an impetus, SIAM urged the government to continue the current tax sops on R&D expenditure. No announcement was made to that effect either.
On the other hand, a big boost was given to the road and infrastructure sectors to improve connectivity with ports and remote villages. About 2,000km of coastal connectivity roads have been identified for development and Budget allocation for highways was increased too, to Rs 64,900 crore in FY'17-18 from Rs 57,976 crore in FY'16-17.
Jaitley announced, “The total length of roads, including those under the Pradhan Mantri Gram Sadak Yojana, built from 2014-15 until the current year is about 1,40,000 km, which is significantly higher than previous three years." He also mentioned that roadwork construction speed has amplified and has now reached 133 km/day in ’16-17 as opposed to 73km/day in ’11-14.