Impact of Budget 2018 on the Two-Wheeler Industry
The Union Budget 2018 presented adequate steam to propel the two-wheeler industry on the growth curve. Some of the announcements focused directly on the auto industry.
Other set of proposals related to infrastructure, rural economy, and MSMEs will additionally drive the two-wheeler industry towards expansion.
Let’s assess the impact of the Union Budget 2018 on the Two-Wheeler Industry-
- Rise In custom duty
“To further incentivize the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items,” said the finance minister of India while presenting the Union Budget 2018.
One of these sectors was the auto industry. Custom Duty on fully knocked down (CKD), and completely built unit (CBU) imports of motor vehicles including two-wheelers was increased by 5% each.
CKD means import of two-wheelers and four wheelers in the form of parts, and not as pre-assembled units. The customs duty for CKD increased from 10% to 15%. CBU refers to import of pre-assembled two-wheelers and four wheelers. The customs duty for CBU increased from 20% to 25%.
Import duty of several automotive components have been increased to 15%. Some of these components include engines, gearboxes, brakes, transmission shafts, clutches, drive axles and more.
The increase in custom duty, and import duty will promote local manufacturing, and the sourcing of two-wheelers and their components. Local manufacturing will in-turn lead to lower overall pricing.
In addition to the custom duty hike, there are several other announcements which will boost the two-wheeler industry. The government aims to complete the National Highways exceeding 9,000 kilometers during 2017-18. It intends to build 35,000 kilometres of road ways in the Phase 1 of Bharatmala Pariyojana. This project will provide seamless connectivity to borders, and other interior areas.
Where there are roads, can two-wheelers be far behind? Studies have shown that the addition of highway capacity induces growth in vehicular travel. Therefore, it can be said that Bharatmala will help boost the demand of two-wheelers.
- Rural And Agriculture Focus
The budget focused on strengthening the agriculture and the rural economy. The minimum support price (MSP) for the majority of the rabi crops has been declared at least at one and a half times the cost of production involved. There is a proposal to develop 22,000 Grameen Agricultural Markets (GrAMs) and 585 Agricultural Produce Market Committee (APMCs). Rs. 10,000 crore have been allocated for the fisheries & aquaculture, animal husbandry funds.Increased produce, higher MSP, and retail growth in rural market, will leave more money in the hands of the farmers, and the rural population, which will help drive sales of two-wheelers.
- Budget focuses on MSMEs
Several measures have been suggested to facilitate ease of business for MSMEs. Online loan sanctioning will be promoted and the TReDS platform will be linked with GSTN. Rs. 3,794 crore to MSME Sector has been provided for giving credit support, capital and interest subsidy, and innovations. These measures will help manufactures of two-wheelers and automotive components, to build capacity.
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