As India grapples with the now surfacing financial repercussions of the continuing lock-down which has been extended twice since April 14 and still doesn't allow complete relaxation on movement or economic activity in major hubs of the country, leading to business closures and job losses, Prime Minister Narendra Modi announced a massive economic relief package in his latest address to the nation tonight.
Stressing upon the need for becoming self-reliant after the pandemic which has crippled supply chains and global economies big or small, Prime Minister Narendra Modi announced a Rs 20 lakh crore (US$ 260 billion) economic relief package under the scheme christened 'Atma Nirbhar Bharat' or Self-Reliant India.
The said amount is nearly 10 percent of India's US$ 3.20 trillion GDP recorded in 2019 and aims at replenishing dying liquidity in the market, creating demand as well as boosting the Make-in-India programme to make India a self-sufficient country to fulfill its needs.
Road to self-reliance
He called upon citizens and businesses to stay determined and convert this crisis into an opportunity to make India a global hub for various industries. The Prime Minister said that India's economy has the potential of making a 'quantum leap' rather than taking 'incremental steps' to emerge a winner in these dire times.
He mentioned that the Indian growth story and its accord to be self-reliant will depend upon five integral pillars:
- Making a 'quantum leap' rather than taking 'incremental steps' in its economy
- Developing robust infrastructure
- Building technology-driven systems
- Demographics, and
- Building intelligence-driven supply chain
While the finer details are awaited, prima facie, the stimulus package seems meant primarily for the local industry and MSMEs which employ the chunk of the population and have been the worst-hit among all industrial players due to a complete shutdown and lack of working capital over the past few weeks.
India Auto Inc hopeful of grants
The automotive industry which contributed 7.5 percent to the country's GDP in FY2018-19 and 49 percent to the manufacturing GDP, also looks to get some relief coming its way with the intricate details to be announced by the Finance Ministry led by Finance Minister Nirmala Sitharaman from tomorrow onwards.
According to Rajan Wadhera, president, SIAM, "India has delivered in the fight against Covid-19 on the medical front. Now the promise of Rs 20 lakh crore comprehensive economic package announced by the Hon’ble Prime Minister, focusing on economic activities and an overall aim of a self-reliant India, will provide the right boost to demand and grow our economy once again."
"The Indian automotive industry is a strong pillar of Make-in-India with huge contributions to GDP and employment and relies on its highly indiginised supply chain. We are hopeful that a focused package to support the Indian automotive industry would be announced by the Hon’ble Finance Minister, when she announces the details of the package," Wadhera added.
Various relief measures sought
In various recommendations, the Indian automotive industry including vehicle OEMs and suppliers collectively, has been requesting the government for grants such as a reduction in the GST on vehicles and components to drive the demand in the market or reducing tax on R&D activities to aid more localisation.
Offering his views on the PM's announcement, Deepak Jain, president, ACMA, said, "Announcement of the Rs 20 lakh crore economic package is indeed very welcome and is the need of the hour. This will bring much needed relief to several stressed sectors and industries, especially the MSMEs."
"A significant proportion of the industries in the automotive component sector are MSMEs. ACMA is committed to making the Prime Minister's Vision of self-reliance through localisation, global competitiveness, vibrant local manufacturing and a robust local supply chain a reality. Reforms in land, labour, liquidity and laws are critical to make India a driver of global economy," Jain added.
While it has been witnessing a 15-month tenure of continuous bloodbath right from the festive season of calendar year 2019, one of the key demands of India Auto Inc has also been the speedy introduction of a vehicle scrappage policy from the government in order to generate demand for new and less polluting vehicles.
In a recent interaction with Autocar Professional, Sunjay Kapur, vice-president ACMA, Chairman, CII Haryana Council and Chairman, Sona Comstar, had said, "The market in China has revived and there's been a lot of incentives for buyers and demand creation has happened. We definitely look forward to something similar in India. We hope the government will help in demand creation whether it be through GST reduction, vehicle scrappage policy or by delaying some of the other regulations that they had planned to implement."
"India has a good opportunity because India has the technology, the manpower and the expertise in small cars. What we need to ensure are two things – one each from the government and industry's ends. While the industry needs to bring in technology, the government needs to make it easier for us to operate. That's all it takes. It is very easy to say this but for companies to relocate, we need to make it easy to Make in India. For instance, can we look at some sort of grants on R&D, and can we reduce the power and fuel costs which are among the highest in the world?" added Kapur.
According to Nagesh Basavanhalli, MD & CEO, Greaves Cotton, "Prime Minister's special package of Rs 20 lakh crore focusing on Make-in-India and local manufacturing is a good step for economic revival. The quantum of package has come across as a pleasant surprise and does have the potential to jumpstart the manufacturing sector among others. Any effort to get us self reliant is a welcome one and one that can insulate India from the economic impact of Covid-19 like situations to a large extent. The industry is now looking forward to the finer details of this enormous package. All eyes now on the Finance Minister."
Commenting on the PM's announcement, Sunjay Kapur said, "It's a once-in-a-lifetime opportunity and we need to act now. The Prime Minister has spoken encouraging words and announced an impressive package. Let’s hope the Finance Minister can give us more clarity on how this will be deployed. We look forward to a boost to the economy. We need this boost."
Vipin Sondhi, MD and CEO, Ashok Leyland said: “The address by Prime Minister, has lifted spirits and created positive sentiments. It was inclusive, comprehensive and compelling. While we await the details, the announcement of reforms-cum-stimulus to the tune of 10% of GDP, amounting to Rs. 20 lakh crore has the potential to be sustainably beneficial to all sectors of the economy. Industry and in particular the CV industry will stand to gain as well as the economy starts to move again. The massive thrust on self-reliance, along with the focus on creating local demand, and resurrecting local supply chains should provide enough impetus to kick start the economy. All these measures are the need of the hour and frankly more than expected given the limited fiscal room that was available. With the pride of Make in India through quality, we look forward to a stronger, self-reliant India where everyone prospers.”
Venu Srinivasan, chairman, TVS Motor Company: “The Prime Minister has showcased outstanding leadership in battling the Covid-19 crisis. We appreciate the government’s initiative to roll out a visionary economic stimulus package of Rs 20 lakh crore. This will bring much needed relief to several stressed sectors and industries. First, the government must prioritise helping the small, medium and micro industry employees and facilitate a direct benefit transfer to employees in unorganised and small scale sectors. Second, they must ensure credit backstop for micro, medium and small industries so that they do not go into cash crunch and finally, I am hopeful that there is a stimulus created to propel demand. Demand is key to drive the market and it is essential to inject confidence in the economy for people to come out and buy. The Indian Auto industry is a strong pillar of the Indian economy with huge contributions to GDP and employment. We are confident that this focused package will infuse positive sentiment in the industry in the long-run.”
Will the Finance Minister announce the much-awaited vehicle scrappage policy and / or the GST reduction on new vehicle purchase? Stay tuned.