Industries react to Union Budget for 2016-17

Following the announcement of budget for 2016-2017 by Shri Arun Jaitley, Finance Minister of India, industry leaders have started reacting to the same. The reactions have been moderate as the financial layout is not kind to the automobile sector.

Mr. Joe King, Head of Audi India, said, “The budget presents a transformative agenda with clear-cut focus on initiatives for farmers, rural sector and infrastructure development. However, it negatively impacts the automobile industry. We are disappointed that the industry’s demand on reducing excise duty has not been addressed. On the contrary, 1% Infra cess on Petrol, CNG, LPG cars, 2.5% on small diesel cars and 4% on bigger diesel cars and SUVs has been added which will further affect the price and consequently demand. Also, we need to evaluate the impact of extra tax levy of 1% on purchase of cars above Rs.10 Lakh. Government has not announced any positive initiatives for the industry which contributes so heavily to the manufacturing sector and overall economy. However, we are pleased to see the increase in expenditure on infrastructural development with specific announcements like approval of 10000 Km of National Highways and total investment in road sector at 97000 cr in FY17 that should help in people getting better road infrastructure.”

Mr. Shekar Viswanathan, Vice Chairman and Director of Toyota Kirloskar Motor Pvt. Ltd. was quoted as, "We would have expected some measures to promote alternate fuel technologies which would have helped the environment also. We would encourage the government not to just think based on size of the vehicle which has no relation to the technology. Taking older vehicles off the road should be a priority for the government. We compliment the measures and schemes which have been introduced to benefit the masses and also thrust on infrastructure which would have a long term impact on the growth of the nation."

Mr. Guillaume Sicard, President of Nissan India Operations, was visibly not enthused by the budget and said, “The Union Budget 2016 has continued with the government’s focus on maintaining fiscal deficit, agriculture, infrastructure development and recapitalizing of PSU banks. The budget gives special focus on the economy at the grass-root level which will have an overall positive impact in the long run. Additionally, we also welcome Government’s decision to amend the Motor Vehicle Act in passenger vehicle segment to allow innovation. This, coupled with a focus on infrastructure will help improve the overall public transport in the country. There is not much for Auto industry in this budget. Infrastructure cess increase up to 4% on passenger vehicles will definitely have an impact on the prices. We do not foresee that to be a major burden for small car buyers but the luxury cars and SUVs will feel the heat. We are still trying to understand the modalities of collection of TDS of 1% on more than 10 lakh priced cars. Further, curbing incentives on in house R&D spends from 200% to 150% is not very positive. There is no presentation on roadmap for GST implementation, additional Incentives for Electric Vehicles and Hybrids under FAME Scheme and the plan for Vehicle Scrappage scheme which is damper.”

Mr. Ashok P Hinduja, Chairman, Hinduja Group of Companies (India), told, “The Budget is pragmatic and growth-oriented. The Government’s commitment for retaining the fiscal deficit at 3.5% will have sobering effect on the interest rate in general and on the yields of government and corporate bonds in particular. This will place our economy in the double digit growth trajectory. Coupled with agriculture, rural and infrastructure spending including roads and highways, the economy will have a resultant effect  of bottom-up demand generation and job creation. The auto sector will stand to benefit by the proposed amendment to the Motor Vehicles Act to allow the private sector participation in the passenger vehicle segment.  Amnesty window announced for unaccounted money is a good initiative. However, tax on dividend above Rs. 10 lakh is a big disincentive for promoters / large investors.”

Tata Motors also reacted on the budget and their spokesperson has this to say, “Tata Motors welcomes the Union budget announced today. We are particularly encouraged with the government opening up private participation to the public road transportation sector, for a potential to address commuters' grievances, by enhancing the quality of public road transportation services. Boost in spends related to infrastructure and construction of roads and highways, will help increase spends on commercial vehicles, at the same time improve last mile distribution. Positive changes to custom duty, will help further the country’s Make in India initiative. Amendments to the Motor Vehicles Act, removing permits for plying small passenger vehicles, will encourage small entrepreneurs, and more importantly ensure safe and efficient last mile connectivity, across states.”

"While the passenger vehicle industry has been facing challenges over last few years, it has barely begun to show some signs of recovery. Additional cesses may disincentivize passenger vehicle customers, impacting the industry," he added.

Also Read: Post budget: Snapshot of Union Budget 2016-17