India’s automotive sector is in dire need of immediate incentives to boost demand, according to Society of Indian Automobile Manufacturers (SIAM) but the new stimulus package announced the government paid no heed to the sector’s needs.
The agricultural sector was given a healthy stimulus package which could indirectly benefit the auto sector, but no direct incentives were announced for the auto industry. The sector contributes to around 15pc to India’s GDP and has been facing tremendous challenges even before the COVID-19 pandemic.
Auto sector growth declined by 18pc in 2019. SIAM expects the Indian auto sector to have negative growth of 22pc to 35pc in FY2021. SIAM has urged the government to provide direct fiscal measures to boost demand in the auto sector which seems to be potent given the situation. SIAM had made several suggestions including a reduction in base GST rates from 28pc to 18pc for a limited period and an incentive-based vehicle scrappage policy.
Dealerships have started resuming operations and suffered heavy losses during the lockdown. SIAM believes that the dealerships need liquidity boost and should be included under Micro, Small and Medium Enterprises Development (MSME) Act.
Metals and scrap demand are directly related to the growth of the auto and auto ancillary sector. The auto sector is a major consumer of steel, zinc, aluminium and lead. The sector has been reeling under prolonged slowdown. The recent declines in auto sales has significantly impacted industries that supply raw material to the sector, including auto steel makers, battery makers and metal smelters that supply metals and alloys to the auto ancillary sector.