Budget comment: Dr Pawan Goenka, President, Automotive and Farm Equipment Sectors, Mahindra & Mahindra

“Against the backdrop of some signs of an economic deceleration, the Finance Minister has delivered a Budget with good intent. The budget has clear emphasis on key areas of infrastructure, agricultural development, healthcare and education.

From the macroeconomic perspective, the accelerated growth forecast of 7.6 percent in FY13 and the attempt to control the fiscal deficit to 5.1 percent are steps in the right direction. However, there is some level of apprehension on whether these targets can be achieved.

Specific to the automotive industry, the industry is relieved that the finance minister did not take any retrograde step like imposing a tax on diesel vehicles. The excise duty hike was in a way expected and we will have to pass on the price increase to the consumer. However, with all the surcharges and special levies, the top excise duty rate is as high of 29 percent. I believe this is simply too high.

For Mahindra vehicles, the price increase would be as low as Rs 3,000 to a maximum of Rs 35,000 depending on the product category. On the tractor side, service tax and excise duty hike will also increase overall input cost and therefore an immediate increase of Rs 3,000-5,000 is expected. We expect some short-term negative impact on demand but with time we think it will wear off.

Other positive steps are extension of weighted deduction of R&D by five years, introduction of weighted deduction for skills development and reduction in taxes and duties for hybrid and electric vehicle components.

On the concerns side, is the inadequacy of the initiatives to provide the push to manufacturing, for achieving the targets laid out in the National Manufacturing Policy, of achieving 25 percent share of GDP in the next 10 years. I would have liked the Budget to lay out some concrete steps in this direction. I would have also liked to see a more definitive statement on the timeline for GST and DTC.”