Finance Minister Nirmala Sitharaman said Tuesday that the slowdown in auto sales can be traced back to a number of factors, including the transition to Bharat Stage VI emission norms, higher registration fees — and studies that point to millennials not wanting to commit to EMIs to buy a vehicle and instead preferring cab and Metro services.
Speaking in Chennai, she said the government was “seized of the problem” and is trying “to solve it”.
Responding to a query on the industry’s argument that tax cuts on automobiles can boost demand, Sitharaman said: “That is a very fine argument to give and I agree, but it is also a truth — and I am not negating anything that you are saying — that the automobile industry in India did have its good times at least till one-and-a-half years ago, till two years ago. There was definitely a good upward trajectory for the entire automobile sector.”
She said the sector has been impacted by a number of factors. “Now that’s why I periodically remind that the automobiles in particular and the components together, have been affected by several things, inclusive of BS-VI movement, inclusive of that registration fee related matter, which we have deferred till June, inclusive of the mindset, some studies do tell us, the mindset of the millennials who are now preferring not to commit an EMI (equated monthly installment) towards buying automobiles, but would consider taking (cab aggregators) Ola, Uber and everything else or take the Metro. So, (a) whole lot of factors are influencing the automobiles sector,” she said.
The sales of cars and utility vehicles witnessed the worst monthly decline in August, with domestic sales of passenger vehicles falling 31.6 per cent year-on-year to 196,524 units in August, according to data released by the Society of Indian Automobile Manufacturers Monday — the lowest number since 1997-98 when SIAM started recording data.
In July, auto sales had dropped by 18.71 per cent from the same month last year, which was the sharpest decline in nearly 19 years. The slump has rendered almost 15,000 workers jobless over the past two-three months.
The Finance Minister said the auto sector has demanded a GST rate cut and the GST Council has to decide on that, she said. The government, she said, is considering more measures it can take to help the auto sector.
In other measures, while briefing reporters on the ‘100 days of initiatives and decisive actions taken by the Government’, Sitharaman said the Centre has set up a task force to boost investments in infrastructure projects and was in the process of identifying the sectors which needed funding from the Centre.
“Government spending has to be speeded up to boost consumption. The best spending (by the government) will be on infrastructure. We have (already) announced Rs 100 lakh crore and that is the amount which I think has to be speeded up for infrastructure-related projects…I have appointed a task force to speedily identify the projects so that money can be front-loaded,” she said.
The Minister said the Task Force has commenced work and was in the process of identifying those projects which would receive the funding (Rs 100 lakh crore).
The task force, comprising secretaries from different ministries, other senior officials and the Niti Aayog CEO, would identify technically feasible and financially/ economically viable infrastructure projects that can be initiated in 2019-20, she said.
Sitharaman said that the government, as part of its move to make India a USD 5 trillion economy, has chalked out various measures, including infrastructure spending and merger of public sector banks, among others.