Union Budget 2014-15 expectations for automobiles

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.

Indian auto industryAs Indian automobile industry performance continues at a slow pace, revival could be a while away. Excise duty reduction announcement made during Interim Budget 2014-15 is expected to be continued to boost sales and growth. Economy is expected to step on the threshold of recovery in the latter half of this fiscal.

Budget expectations for automobiles point to central government announcing reforms to improve disposable income and better consumer sentiments. Introduction of Goods and Services Tax (GST) can tap into India’s potential as a cost-competitive manufacturing hub as per Arun Singh, Senior Economist, Dun & Bradstreet, India.

Since the current government is expected to have a new work agenda, Union Budget 2014-15 could spring in a few surprises. With growth targets expected to be set at 5-6%, central government would present a realistic budget that aids in reducing gross borrowing for the year thereby reducing in part strain on availability of finances for the private sector.

Challenges would pertain to fiscal consolidation while focusing on growth revival. A robust fiscal policy should be intended to support growth and monetary policy. It is now left to be seen what adjustments are made to the former government’s budget to execute and implement its own strategy. Going forward, provisioning of food subsidy and implementation of 7th Pay Commission would act as road blocks towards attaining fiscal deficit.

With growth recovery moving at a modest pace, revenue generation is just as slow. Revenue could be enhanced through broadening of the tax base or improving tax compliance. GST and DTC implementation can aid tax buoyancy. Focus on infrastructure sectors and infrastructure financing is expected. Coal, power, nuclear power, renewable energy, transport, information technology, and urbanization will recieve a boost in varying degrees in the upcoming budget.