Finance Minister Nirmala Sitharaman’s fifth and last tranche of the Rs 20 lakh crore special economic package is out. However, the auto industry is still looking forward to some direct fiscal measures which could have boosted demand for the auto sector and stop job losses. 

While commenting on the series of stimulus announced under the ‘Aatma Nirbhar Bharat’ package, Rajan Wadhera, president, SIAM welcomed the focus towards MSMEs, NBFCs and the agriculture sector. “The agri sector package may benefit the auto sector indirectly in the medium-term but the Indian automotive industry needed an immediate stimulus to boost demand, which has not happened.”

India Auto Inc has been fervently waiting for a vehicle scrappage policy. 

Negative growth likely in FY2021
The Indian automotive industry supports employment of more than 3.7 crore people and contributes to 15% of GST amounting to Rs 150,000 crore every year.  The sector was already facing an unprecedented challenge with 18% de-growth last fiscal. As per an assessment made by SIAM on the impact of Covid-19 on demand for vehicles in the current financial year FY2021, the automobile sector could have a de-growth in the range of -22 percent to -35 percent in various industry segments, if the overall Indian GDP growth is at 0-1% in the same period.

Wadhera added that it is against this background that the sector was keenly looking forward to some direct fiscal measures. He mentioned that SIAM has had several engagements with the Government at various levels, where specific suggestions were made for demand stimulus including reduction in base GST rates from 18-28 percent for a limited period and an incentive based vehicle scrappage policy, which would have made it a less painful revival and kick-started the industry.

Wadhera pointed out that there is also an urgent need to support the dealers in terms of improving their liquidity and including them under MSME Act by changing its definition, “The Industry would continue to engage with the government and seek direct interventions for revival.”