The automobile sector will keep a close watch on the Union Budget that will be presented by Finance Minister Nirmala Sitharaman on 5 July as they expect reforms to be announced that would ease the sufferings of the industry. The automobile sector has seen a slowdown since September 2017 and has failed to quickly adapt to the conversion to a much greener channel in order to tackle climate change and use more of renewable energy resources rather than the conventional sources of energy.
At present, the automobile industry is charged 26% Goods and Services Tax, a huge burden on the sector that has reported a dip in profit and sale as the high rate of tax is preventing customers from preferring to own vehicles. The burden not only extends to the customers but also affects the manufacturers as they face an increase in the cost of production.
The automobile industry is hoping for a reduction in the GST rate from the existing 26% to 18% to be announced in the budget, a move that could ease the pressure on the sector and would boost the sales and the profit.
The automobile sector has failed to quickly adapt to the BSVI norms, as they continue to struggle to try shifting from the existing BSIV stage to the new norms that the government wants the sector to shift to. Electrification of vehicles has not yet picked up in the country, largely because of the lack of incentives provided for taking the greener path. In the Economic Survey tabled on 5 July, there is a huge emphasis on shifting to the electrical mode of transport and shifting to renewable sources of energy in order to cut down the use of conventional fuel sources in order to battle climate change.
In addition to the existing woes, the unavailability of credit and the one-time premium policy also hinder the sales of the industry, as customers are unwilling to spend large amounts at one go. Further, the lack of incentives has also lead to the slowdown of the sector. However, reforms and incentives if announced would be an advantage for the sector as the growing population of India would only mean an increase in vehicle ownership.