Budget 2019

Needed, more money in the hands of people

Our Bureau New Delhi | Updated on June 27, 2019 Published on June 27, 2019

Auto, consumer goods sectors also want tax sops, stimulus to boost the economy

 

The Budget should strive to rationalise taxes, put more disposable income in the hands of the people and stimulate demand for housing to give a boost to the economy, industry leaders and analysts said.

Automobile, consumer products, FMCG and real estate sectors have been witnessing softening of demand in the last financial year for a variety of reasons and there is an urgent need to reverse the same, they argued. The Budget should lay the “foundation stone for future years of the Modi government 2.0,” said Paresh Parekh, Partner and Leader at Consumer and Retail Tax at EY India.

 

 

Automobiles

During most months of the last financial year, the volume of vehicles sold — both cars and two-wheelers — fell year on year hitting the topline as well as bottomline of most automakers.

“The automotive industry is currently facing a daunting challenge of a deep slowdown that urgently needs some form of stimulus from the government to supplement the efforts being made by the industry,” said Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM).

The demand will be further hit when the new safety and emission norms come into play in the next few months, driving up the cost of vehicles. A reduction in the GST rates will go a long way in maintaining the price competitiveness of the industry and boosting consumer demand, he said.

Rajeev Singh, Partner, Deloitte India, sought reduction in GST on all vehicles to 18 per cent, from 28 per cent now. Another way to boost demand is to have options to incentivise the replacement of older vehicles that were registered before 2000. Similarly, hybrid vehicles, which currently attract higher tax rates, should be favourably looked at so that they help in transition to electric vehicles.

“Any incentives for (localisation/ R&D) hybrid vehicles on par with the EVs are expected to be beneficial for the auto industry,” he said. According to Tarun Mehta, CEO and Co-Founder of Ather Energy, in the electric vehicle space, there should be long term policy support and predictability as they would allow OEMs and ancillary players to make deep investments.

Harish Sheth, Chairman and Managing Director, Setco Automotive, suggested pulling forward the implementation of the scrappage policy for vehicles of over 10 years in age. This would be in the best interest of medium and heavy commercial vehicles and farm machinery, which faced hard time recently

FMCG

For FMCG and other consumer products, the biggest concern has been muted volume growth due to softening of demand, particularly in the rural regions. According to a report by Edelweiss Securities released earlier this month, while there was a slowdown in automobile and consumer durable sectors in the third quarter of FY2019, sales growth of consumer staples remained resilient largely due to direct benefit transfer scheme and government-led initiatives.

“But, the cookie crumbled (for consumer staples companies) in Q4FY19 as the government, to manage fiscal deficit, massively slashed its expenditure. This triggered deceleration in the rural economy. Moreover, direct transfer schemes of Central as well as State governments took a hit with the setting in of the Model Code of Conduct and the PM-Kisan scheme’s limited beneficiary list. Seasonal pangs, liquidity tightening and soft macros added fuel to fire, exacting a toll on volume growth,” said Abneesh Roy, Executive Vice-President, Edelweiss Securities, in a report.

Companies pin hopes on the Budget to put more disposable income in the hands of rural and low-income consumer groups.

Consumer durables

Despite lower penetration levels of consumer electronics and appliances products, this industry has been facing challenging times for the past three years and has seen muted growth.

Kamal Nandi, Business Head & Executive Vice-President, Godrej Appliances and President of Consumer Electronics and Appliances Manufacturers Association (CEAMA), said, “We expect the government to reduce the Customs duty on open cells (used in manufacturing of LED TV panels) from 5 per cent to 0 as there is no ecosystem for local manufacturing of open cells in the country.”

The industry has also been urging the government to reduce GST rates on air-conditioners and TV above 32 inches to 18 per cent from the current 28 per cent, which they believe will provide a boost to the sector.

Real estate

Construction is another sector that is sorely hit by the sagging economy. Real estate, being among the sectors that generate highest employment in the country, could contribute immensely to India’s economy. However, industry experts believe that certain measures are required to give a boost to the slow-moving sector.

“Last few Budgets have taken many steps to stimulate affordable housing demand. However, despite the efforts, conversion of latent demand to actual sales have remained slow. Some urgent steps are therefore required under the ambit of the Budget to provide a fillip to the sector,” said Mudassir Zaidi, Executive Director (North), Knight Frank India.

According to property consultants, Anarock, unsold housing inventory in the top seven cities in the country stood at 6.65 lakh units in Q1 of 2019. The unsold housing stock across the top seven cities saw a 16 per cent decline since the peak DeMo period in 2016 when it stood at nearly 7.90 lakh units.

This decline in unsold stock is largely because dust has begun to settle down on policy overhauls like RERA and GST coupled with multiple government initiatives that is helping bring back real buyers and investors into the property market, said Anarock Chairman Anuj Puri.

(With inputs from Garima Singh, Meenakshi Verma Ambwani, S Ronendra Singh and TV Jayan)

Published on June 27, 2019
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