As the Union Budget 2024 is set to be presented on July 24, the Indian auto industry is brimming with anticipation and optimism. The sector, which plays a crucial role in the country’s economy, is eagerly awaiting key announcements that could shape its future trajectory. Finance Minister Nirmala Sitharaman's interim budget earlier this year provided little in terms of direct benefits for the auto sector, but industry stakeholders are hopeful that the full-fledged budget will bring much-needed relief and support.
Electric Mobility and FAME 3
Among the priority fields for the further budget, the further development and popularization of electric vehicles (EVs) is predicted to be one of the highest priorities. The Indian government’s effort in the fight against carbon emissions and encouraging sustainability within the transportation sector has been highlighted through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. After FAME 1 and FAME 2 ended in March 2024, the auto industry is pinning its hope on FAME 3.
The proposed FAME 3 scheme is anticipated to have a significant outlay, possibly around ₹10,000 crore. It aims to build upon the foundation laid by its predecessors by not only providing incentives to consumers but also encouraging the development of a robust EV ecosystem. This includes investment in charging infrastructure, local manufacturing of key components like batteries, and overall support for the adoption of electric mobility across India.
Advocating for Hybrid Vehicles
While electric vehicles have garnered substantial support and incentives, the hybrid vehicle segment has often felt overlooked. Hybrid vehicles, which offer lower emissions compared to traditional internal combustion engine (ICE) vehicles, have not enjoyed the same level of fiscal benefits. Automakers with a strong presence in the hybrid segment have been advocating for tax sops and incentives similar to those granted to EVs.
The Union Budget 2024 might address this disparity by introducing measures that reduce the tax burden on hybrid vehicles. Such steps would not only promote the adoption of cleaner technologies but also provide consumers with more diverse and eco-friendly options in the automotive market.
GST Inclusion for Petrol and Diesel
The high cost of petrol and diesel has been a persistent concern for consumers and the auto industry alike. Fuel prices hovering around ₹100 per liter have had far-reaching impacts on the economy, affecting everything from consumer spending to logistics and transportation costs. There has been a growing demand to bring petrol and diesel under the Goods and Services Tax (GST) ambit.
Incorporating fuel under GST could potentially lower prices, providing relief to motorists and reducing operational costs for businesses. This move would align with the government's broader goals of inflation control and economic stability. Industry stakeholders are hopeful that the Union Budget 2024 will take decisive steps in this direction, addressing a long-standing issue that affects millions of Indians.
Boosting Infrastructure Investment
The rapid development of road infrastructure has been a key driver of growth for the auto and logistics sectors. Investments in highways, expressways, and urban roads have not only facilitated smoother and faster transportation but also stimulated demand for vehicles and ancillary services. As part of the Union Budget 2024, it is expected that the government will continue to prioritize infrastructure spending.
Increased allocation for road and transport infrastructure could further bolster the auto industry by improving connectivity and reducing logistical challenges. This, in turn, would enhance the overall efficiency and productivity of the sector, contributing to its sustained growth.
The Future of India’s Auto Industry
As the Union Budget 2024 approaches, the Indian auto industry stands at a critical juncture. The decisions and allocations made in this budget will play a pivotal role in shaping the sector's future. Whether it is through the promotion of electric and hybrid vehicles, addressing the high cost of fuels, or investing in infrastructure, the government's policies will have a lasting impact.
Industry leaders and stakeholders are hopeful that the budget will bring a mix of incentives, reforms, and investments that will not only address current challenges but also pave the way for a sustainable and prosperous future for the auto industry. As the full budget is tabled on July 24, all eyes will be on the announcements that could define the next phase of growth and innovation in India's automotive sector.
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