Excise duty hike on auto, consumer durables not in spirit of Make in India; demand to take hit: ASSOCHAM

At a time when manufacturing output has been declining by over four per cent (in October, 2014) with consumer durables reporting a huge drop of over 35 per cent and motor vehicles segment a fall of 9.8 per cent, bringing these segments into higher excise duty regime will spell a death knell for consumer demand and industrial growth, ASSOCHAM said.

"This is not surely in keeping with the spirit of Make in India. The Make in India's first priority should be to revive industrial growth through lower cost of production and lower price tag for the consumer so that demand can be revived," ASSOCHAM Secretary General Mr D S Rawat said.

He said however much we may ask for ease of doing business and however much the government may provide that, it is relevant only if there is a consumer demand and purchasing power ''. First things first approach should be followed in the Make in India campaign. We will certainly like demand revival to be the top priority and this will certainly not happen by raising excise duty, which will then be passed on to the consumers,'' Mr Rawat said.

Besides, in the ASSOCHAM's reckoning the move to restore the excise duty back to the 12 per cent and above in the case of motor vehicles and consumer durables will also not result in higher tax collections either. "To the extent, the government seeks higher duty, the sales volume will drop beyond that.It would thus be a counter-productive move even from the taxation point of view''.

In our view, no excise rejig should be done on these items till the roll out of the Goods and Services Tax.

As regards the recent directive to the government departments and ministries to buy electronic items only from the domestic firms, the move is also not in keeping in the true spirit of Make in India which should aim at taking Indian products all around the world through quality and cost competitiveness and not through protection, even though the move may help the sector in a narrow sense.

Besides, such a move could lead a retaliatory action by the large consuming countries like the US where the Indian outsourcing industry has already been facing protectionist measures by some of the states in the US.

For record sake, the following figures do not justify restoring the excise duties to higher levels from tomorrow.

The Consumer durables and Consumer non-durables have recorded degrowth of (-) 35.2% and (-) 4.3% respectively, with the overall growth in Consumer goods being (-) 18.6% in October.

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