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Explained: As PM Modi praises auto industry, why its leaders claim ‘lack of action’ on Govt’s part

Praise came from various corners of the government for the automobile industry's contribution to India's growth. But what have industry leaders argued? What are they demanding?

By: ENS Economic Bureau | New Delhi |
Updated: August 29, 2021 10:08:15 pm
At a car showroom. (Express Photo: Jaipal Singh, File)

At the 61st annual convention of Society of Indian Automobile Manufacturers (SIAM) on Wednesday, government representatives, including Prime Minister Narendra Modi, praised the industry’s contribution to India’s growth and employment generation.

At the same time, with government representatives listening in, auto industry leaders raised concerns over the industry’s decline and said there has been “no concrete action” on the ground to reverse the situation.

Who praised the industry?

Praise came from various corners of the government for the automobile industry’s contribution to India’s growth.

In his message, the Prime Minister had lauded the industry’s contribution towards manufacturing, furthering exports, creating numerous employment opportunities and adding to the ease of living for people.

Niti Aayog CEO Amitabh Kant, meanwhile, said it would be impossible for India to grow at high rates for a long period of time without the automobile sector being the key driver of the country’s growth.

What did industry leaders say?

R C Bhargava, the chairman of Maruti Suzuki India Limited, and Venu Srinivasan, the chairman of TVS Motor Company, raised concerns over the high taxation and wondered if the industry’s contribution was being recognised.

As the prices of automobiles have been rising on account of various factors, including new emission norms, insurance charges and rise in raw material cost, industry insiders feel the customer affordability has also been hit by high taxes and rising fuel cost.

“The industry has been witnessing comparatively slower growth in the last 18 months… There have been a lot of statements about the importance of the automobile industry, but in terms of concrete action, which would reverse the decline, I haven’t seen any action on the ground. I don’t think the car industry would revive either with ICEs, or with the CNG, biofuels or EVs unless we address the question of affordability of cars for the consumers,” said Bhargava.

What is the industry’s demand?

The industry has been calling for lowering of tax rates. At the convention, Venu Srinivasan raised concerns on the high taxation on two wheelers. “The basic mode of transportation for the country is being taxed at 28 per cent GST, equal to that of a luxury product. I would like to ask, are we being recognised? Is the automotive industry being recognised for what it has contributed to employment, to revenues and to earning of foreign exchange?”

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What did the revenue secretary say to demands of lowering tax?

While revenue secretary Tarun Bajaj also recognised the industry’s contribution to India’s GDP and GVA, he seemed to have an open mind. “We do not anticipate rates to go down at this stage, but we are happy to see what we can tinker with, so certain segments get encouraged,” said Bajaj.

He requested SIAM to do a deeper study on the specific impact of taxation on affordability, and asked it to recommend measures on how the Government of India can work together with stakeholders for the growth of the industry.

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