Union Budget 2014-15: Budget Expectations For Automobiles Sector

New Indian government is formed after the elections, and Mr. Narendra Modi had taken the charge of the PM office with some deliberate issues pending his decisions for the Union Budget 2014.

However, there are a significant number of expectations from the new finance minister in his maiden budget. The new government with its mantra of ‘minimum government and maximum governance’ had already announced a few measures to change the mode of governance. Given that the government might have a new modus-operandi, we do expect some surprise measures in the Union Budget 2014-15.

Since the consensus for growth this year would be around 5.0% – 6.0%, we expect the government to present a more realistic budget on these lines which would help in reducing the gross borrowing for the year partly reducing the strain on availability of finances for the private sector. The biggest challenge would be therefore to set the path for fiscal consolidation while focusing on revival in growth. India needs a robust fiscal policy to support growth and monetary policy going ahead. Expectations are high on how the government will present an adjustment to the former government’s budget and execute and implement its own strategy. It would be worthwhile to note that provisioning of food subsidy and the implementation of the 7th Pay Commission would be the two major road blocks towards attainment of fiscal deficit target going ahead.

Union Budget 2014-15 Budget Expectations For Automobiles Sector

Given that growth is expected to recover at a modest pace during the year, there would not be a significant revenue augmentation. Nonetheless, if the government announces any definite measures which would either lead to broadening of the tax base or increase in tax compliance, a modest increase in revenue cannot be rule out. However, improvement in tax buoyancy could only result from bringing about structural changes in the tax structure such as implementation of GST and DTC. We also expect the government to take a strong stance on some of the impending tax-related disputes relating to retrospective changes to tax laws, transfer pricing laws and General Anti-Avoidance Rules (GAAR). We would also expect the government to give a clear outline of its intentions on disinvestment which would also help in assessing the resources available for its expenditure.

Nonetheless, the focus would be on how the government charts out its expenditure. There is a need to reassess the quality of expenditure and rebalance the composition of expenditure to Nonetheless, the focus would be on how the government charts out its expenditure. There is a need to reassess the quality of expenditure and rebalance the composition of expenditure to achieve higher capital formation. Hopefully, this time the plan capital expenditure receives a greater share of the overall plan expenditure.

We expect more focus on the infrastructure sectors and announcement of some measures to facilitate infrastructure financing. ‘Investment-linked incentives could incentivize the private sector investments during the current period of slowdown. Sector-wise coal, power with special focus on nuclear power as well new and renewable energy, transport and information technology besides urbanization is expected to receive a boost in the upcoming budget.

The wish list can be long and expectations can be higher, nevertheless, what we would want from the government is outlining a clear strategy and also stating its execution plans as it is the implementation that holds the key to success.

Budget Expectations for Automobiles:

  • The performance of the automobile industry continues to be in the slow lane and revival of the industry might take some more time. In this scenario, continuation of the excise duty cut that was announced in the Interim Budget 2014-15 is likely to provide some boost to the sector, with the economy expected to witness a recovery in the latter half of this fiscal year.
  • We expect the new Government at the Centre to introduce reforms which will help in increasing disposable income and take measures to improve consumer sentiments. We also believe that introduction of Goods and Services Tax (GST) can foster India’s potential as a cost-competitive manufacturing hub.

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