Navigating the Road Ahead: Expectations from the Interim Indian Budget 2024 for Car Owners and Buyers in India
On February 1, 2024, the Finance Minister of India, Mrs. Nirmala Sitharaman, will be presenting the Interim Union Budget 2024. In the upcoming budget, the Finance Minister is poised to align fiscal policies, address GST, deduction thresholds, and tax credits. Anticipation surrounds potential amendments to the Income Tax Act, with scrutiny on lakh and crore figures. The interim budget's impact on GDP, interest rates, and expenditure, especially in sectors like electric vehicles (EVs), is under keen observation. as it will pave the way for the full budget. The government may strategically navigate subsidies and exemptions while emphasizing mutual funds and exports. With a focus on taxation, tax rates, tax deduction and the expectation of an economic roadmap, the upcoming union budget is pivotal for economic recovery and growth. While this won't be the budget for whole of the next financial year, it is important to consider its implications on the upcoming year. We will help you analyse what the latest union budget is expected to bring, for the car owners and potential buyers.
Embarking on a transformative journey, the Indian automotive sector witnessed groundbreaking shifts with key budgetary announcements steering the industry toward innovation and sustainability.
Road Infrastructure Resurgence: Allocating Rs. 75,000 crores to vital transportation projects, the Finance Minister aimed to fortify connectivity for key sectors. This injection of funds not only strengthened road networks but also sparked a logistics revolution, elevating demand for commercial vehicles.
Progressive Scrappage Policy: A paradigm shift came in the form of a voluntary vehicle scrappage policy introduced in the Union Budget 2023. This initiative sought to replace old vehicles, boosting the automotive industry, curbing pollution, and driving up car sales. Benefits extended to automakers, lenders, and the public, with dedicated support for state and central government vehicle scrapping.
Electric Dreams Revitalized: In a bid to accelerate the electric vehicle (EV) revolution, the Union Budget 2023 reduced customs duties on goods crucial for EV batteries. This move stimulated local manufacturing, lowered EV prices, and aligned with the government's eco-friendly vision, promoting sustainable, green mobility.
Hydrogen's Ascendance: A commitment of Rs. 19,700 crores underscored the significance of the National Hydrogen Mission in the budget. With an aim to ramp up hydrogen production capacity to five million metric tonnes by 2030, this initiative sought to reduce reliance on fossil fuels, curb emissions, and usher in green hydrogen plants.
The Interim Budget is usually presented incase of upcoming elections. Most of the times there are no major policy changes and it plays a key role in driving the economy during the election period. The following are the features of the same:
Election Regulations:
Indian election rules restrain the outgoing government from major financial announcements during the campaign.
Continuity of Essential Services:
An interim budget ensures ongoing funding for crucial government services like salaries, defense, and existing programs.
Limited Policy Changes:
Interim budgets avoid significant policy reforms or tax changes to provide flexibility for the incoming government's agenda.
Fiscal Prudence:
Outgoing governments prioritize fiscal discipline and deficit management in interim budgets for financial stability during the transition.
Short-Term Outlook:
Interim budgets cover only a few months, focusing on essential spending and avoiding long-term commitments.
Levelling the Playing Field:
Interim budgets prevent major policy decisions that could unfairly benefit specific sectors or groups, ensuring a neutral environment for upcoming elections.
New Flagship Schemes:
No grand launches of new flagship programs or alterations to existing ones are expected; emphasis is on continuity.
Major Tax Reforms:
Substantial changes in direct or indirect taxes, such as income tax or GST, are unlikely during the interim budget.
So what to expect? The Interim Budget sparks creativity in a lot of areas related to automobile sector. EVs are the spotlight for the years to come and don't worry we have a full-fledged blog on the expectations and the policies for Electric Vehicles. Here is what as a Car Owner and a potential buyer, you can expect from the upcoming budget.
Fuel tax scrutiny: Can India's next consumption phase gain momentum? The recurring debate on whether the Centre should slash petrol and diesel excise rates persists. Economists affirm that such a reduction would unquestionably stimulate economic consumption and curb inflation. Yet, the government must evaluate its fiscal capacity to absorb the impact of a fuel tax cut.
India enforces a high 100% import duty on cars exceeding $40,000 in cost, insurance, and freight, and a 70% duty on lower-priced vehicles. Recent reports suggest India is considering tax cuts on fully assembled electric vehicle imports, potentially spanning five years. The aim is to entice companies like Tesla Inc. to enter the market and potentially establish manufacturing facilities within the country. Sources from Bloomberg indicate that the Indian government is developing an electric vehicle policy that would allow global automakers to import battery-powered vehicles at concessional duty rates, contingent on their commitment to local production.
According to ET Online surveys, about 24.7% of the respondents are looking for reforms related to Fuel and Alcohol under GST. Similarly, 13% of the respondents believe that the union government should not underestimate the oil prices as a near-term risk factor. The common consumer is looking with a hope for the relaxation on personal loans especially car loans. The 2024 budget is having the eyes of the potential car buyers, As the 2023 budget introduced the incentive to exempt from tax up to 1.5 lakh while buying an Electric Car, the 2024 budget has a burden of carrying the legacy.
Forward-Thinking, Yet Unaddressed: While the industry hoped for tax incentives to fuel research and development for new technologies, the government remained silent on this crucial aspect. The plea for support in navigating emerging technologies was still pending.
The suggestion for a uniform GST of 18 percent on all automotive components is expected to be addressed in the upcoming financial year.
In conclusion, the Interim Budget 2024 holds great anticipation for car owners and buyers, with a spotlight on fuel taxes, electric vehicles, and financial relief. While certain expectations find resonance, there's a collective hope for forward-thinking policies to navigate the evolving automotive landscape and foster innovation. Do not forget to read about our expectations from the Budget 2024: A detailed analysis and focus on Electric Vehicles.