Grant Thornton Bharat recently undertook a survey to understand India Inc’s pre-budget expectations, in addition to expectations individuals/ corporate taxpayers have from the Union Finance Minister Nirmala Sitharaman.
With the Union Budget 2022-23 just around the corner – scheduled on February 1, 2022 – the automobile industry is expecting certain provisions from the Indian government, aimed at incentivising stakeholders for future investments in the expansion of domestic manufacturing, new-age technologies and research and development facilities.
Since the automotive sector contributes significantly to the Indian economy, the industry also seeks an improvement in the ease of doing business, the survey found. Some of the key highlights, include:
Key Findings
On asked what the biggest concern is for the automobile industry in budget 2022, 32% respondents voted equally for incentives for production capabilities, and import substitution. Lack of liquidity (25%) and ease of interest rates (11%) were the other major concerns. Among all sub-sectors, 44% expect the electronics sector to receive the greatest thrust in the upcoming budget, followed by passenger safety systems (33%), advanced chemistry cells (15%) and telematics (8%).
The survey findings resonated with current industry sentiment as far as supply chain resiliency is concerned. In an industry that has suffered immensely due to the ongoing semiconductor shortage, 52% said the government needs to help build domestic chip building capabilities, and another 21% expected help in investment in advanced semiconductor R&D. Nine percent respondents said the government could help in global demand recovery, and 18% expected help in decreasing input costs.
An overwhelming three-fourth respondents expect the Union budget to focus on improving the automotive R&D development base in India, while 55% expect vehicle prices to increase post-budget. More than half (52%) of the respondents want the government to consider introducing an automobile dealers’ protection act.
A sizeable section of the survey focussed on electric vehicles. A significant 84% respondents expect further direct exemptions and incentives to foster EV sales, and 74% expect the government to provide suitable measures for fiscal support to start-ups in the EV space.
While several State governments have released policies that have outlined a good mix of demand incentives for promoting EV adoption in their regions, on which aspect should the Central government focus to provide EV purchase incentives, GT asked. About 46% respondents have asked for tax exemptions, 27% have asked for scrapping and retrofit incentives, 16% wants purchase subsidy and 11% wants access to financing.
The survey also asked how the government can effectively plan to monetise steps towards better infrastructure during FY23. Forty five percent believed diversification of sources of finance would help build better infrastructure, while 41% felt there is further need for privatisation to drive investment. Development of the bond market (14%) was the other option.
A sizeable 62% seek incentives towards building new-age skills, while 27% feel an underlining of knowledge-intensive programmes would help accelerate skill development in the automotive sector. There is also a need for an aggressive policy push, felt 11% respondents.
In Conclusion
Speaking on the survey findings, Saket Mehra, Partner & Auto Sector Leader, Grant Thornton Bharat said, “To make India a preferred manufacturing hub, some immediate measures and a long-term strategy are required. For a sector that contributes almost half of the industrial GDP and is experiencing disruptions due to the pandemic, as well as the advent of new technologies around electric mobility and regulatory changes, government support via Budget 2022 is required.”