By Anurag Garg, MD & Country Head
The Union Budget 2022 was the most anticipated budget for the Indian automotive and manufacturing sector. There was a strong push towards manufacturing and localization in this budget. Apart from the usual focus on fiscal deficit, this time the government has shown a great focus on health and infrastructure development this time. To take the overall automotive industry and retail trade back on the path of growth, the Ministry should regulate and reduce GST rates on two-wheelers to 18%. It is important to note that the two-wheeler is a necessity to travel distances by lower class and rural segments for their daily working needs. The market is very volatile, and the automobile prices are increasing every 3-4 months due to incessant price hikes in metals and various other issues, a reduction in GST rate will counter the price hike and aid in shooting up the demands in the market.
We are further awaiting more light on production-linked incentive (PLI) schemes extended for electric vehicles and advanced technology components, the vehicle scrappage policy, and announcements of PLI scheme for semiconductors are major positive steps. These have the potential to boost demand and resolve supply chain disruptions for the industry. The PLI Scheme will get a better push to boost manufacturing and attract investments in the automotive sector, benefitting us in the long run. The increase in custom duties on some sectors is designed to push self-reliance and localization. As we look towards a future with electrified automotive, localization will definitely help in cost optimization in the future. Though it might create initial challenges through price hikes and demand generation, it will be better for our economy in long run.
Additionally, the focus on renewable energy is welcome. The Hydrogen Energy Mission and focus on solar energy will help meet our energy requirements in the future adequately. Health outlay in the budget has increased by almost 100% considering the pandemic situation, this will help us to uplift the health infrastructure in both urban and rural segments of our country.