Budget 2017 – Little to affect the auto industry

The highly anticipated 2017 Budget announcement has included little to affect either carmakers or car buyers. The reason? Since the goods and services tax (GST) will be implemented soon (expected from the beginning of fiscal year 2017-18), the government has opted against the implementation of an interim policy since its impact would be temporary.

However, there are some highlights of relevance to YOU, the Indian car buyer. Here’s a look at a glance:

-As per the recommendation of the Special Investigation Team (SIT), the government has set the upper limit on cash transactions at Rs 3 lakh. This could have an adverse impact on car sales in the short term, as buyers, particularly in semi-urban/rural India do purchase cars directly, using cash. In fact, post demonetization, used car sales dipped significantly (around 60 percent), while new car purchases also dropped (around 40 percent). However, post demonetization, cashless transactions have increased, which could see the negative impact of cash scarcity in the sector subside soon.

-Rs 2,41,387 crore has been allocated for the transport sector. This will include the development of India’s rail, road and shipping sectors in order to improve connectivity. The investment in this sector will be crucial for improving India’s utilization of inland waterways.

-2,000km of coastal roads have been ‘identified’ to improve the connectivity among India’s ports and coastal economic zones.

-For the improvement of India’s national highway network, the investment has been increased from Rs 57,676 crore to Rs 64,000 crore.

Overall, while there are a few important takeaways from Budget 2017, the significant share of the impact will be seen only after the implementation of GST. For now, all car segments, including sub-4 metre vehicles and electric vehicles, will see no immediate impact from the budget declaration and will continue to fall into the prevailing tax structures.

Source: CarDekho.com