Budget 2022-23: Job creation to drive auto sales, say brokerages

When the government announces the Union Budget on Tuesday, brokerages and rating agencies expect measures to make automobiles, particularly two-wheelers, more affordable. Any employment generation initiative, if announced, will spur consumption, they say. A focus on infrastructure development and rural economy will also bode well for the revival of a sector that is set to end fiscal 2021-22 (FY22) with a year-on-year volume decline for the third straight year.

After two consecutive years of fall, volumes were supposed to rise in FY22. But a sharp and sudden surge in the second wave derailed the recovery that was seen in the second half of FY21. Other factors like high ownership costs coupled with a global shortage of semicondu-ctors had an adverse impact on demand.

A reduction in goods and services tax (GST) rates will help bring down vehicle prices after a sharp rise over the last two years, said Nirmal Bang Institutional Equities in its Budget Preview Report. According to the brokerage, reduced and uniform GST rates on auto components will make manufacturers more competitive in export markets. A reconsideration and upward revision of RoDTEP (Remission of Duties and Taxes on Exported Products) rates will also enhance competitiveness of Indian players. Any measures to accelerate the adoption of electric vehicles will help the industry, it said.

Rating agency ICRA, in its Budget expectation report, said a continued focus on improving agri cash flows through rural infra development and greater allocation for income support schemes will augur well for the overall economy and for the sector.

Efforts to boost local manufacturing to achieve Make-in-India goals and a thrust on sustainable tech and electric vehicle adoption, possibly through tax deduction or rationalisation, will also help. “Expect incremental sops and tax rebates for the MSME sector... It would support employment generation. Any boost to consumer disposable income through relief on personal income tax would be welcome,” it said.