3 Good and Bad points of the Union Budget 2016

The auto industry isn’t very pleased with the budget, as most of the announcements aren’t in the favour of the OEMs. There are many not so good points while some have consolidated. Let us see which are the good points and then the bad.

3 Good Points from the Budget

1. The government will be enacting the necessary amendments in the Motor Vehicle Act. They will open up the road transport sector that exists in the passenger segment. This is a good point for the OEMs. Mr Ashok P Hinduja, Chairman, Hindustan Group of Companies (India) stated, “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.”
2. The fiscal deficit target is still at 3.5 percent, this is despite the increase of 15% that was done. Expect the expenses to go up to INR 19.7 lakh crore. “A good budget on expected lines which has managed to keep fiscal deficit at 3.5% of GDP and focus on reviving investment cycle driven by infrastructure and rural development inspite of various domestic and external challenges,” stated Mr Baba Kalyani, Chairman, Bharat Forge Ltd.
3. With the Pradhan Mantri Kaushal Vikas Yojana, 1500 multi skill institutes for training. A budget of INR 1700 crore has been set for it. Roland Folger, Managing Director & CEO, Mercedes-Benz India stated, “Development of the agrarian sector emerged as the key priority in this year’s budget, which is positive for the Indian economy. The budget portrays a steady fiscal picture with considerable spending on infrastructure and rural development, which is laudable.

3 Bad Points for the Budget:

1. Increase in pricing of cars because of infrastructure cess, extra luxury cess and tax on bigger diesel engine vehicles will increase the initial price of the vehicles, demotivating the buyers. “Instead of introducing policies, such as excise duty rationalization, or vehicle modernization, the budget has levied additional taxes that will be further detrimental to sales and growth prospects for the industry,” stated Nigel Harris, Managing Director and President, Ford India.
2. There has been no initiative to promote electric and hybrid vehicles even further. “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,” mentioned Guillaume Sicard, President, Nissan India Operations.
3. The increase in income tax slab that was awaited hasn’t happened. This would have increased the liquidity.

   “The budget overall has been muted as far as passenger vehicles are concerned. The charges on luxury vehicles and high capacity SUVs may not dent sales, but clearly, these charges don’t support demand either. The same holds true for the pollution cess on various car models,” mentioned Dr Wilfried Aulbur, Managing Partner & CEO, India, Chairman Middle East, Head Automotive Asia at Roland Berger.