Budget 2024: Expectations of the Automotive and Technology Industry – Budget 2024 News

By- Neelesh Talathi

Envisioned by Prime Minister Narendra Modi, Viksit Bharat 2047 sets an ambitious roadmap for India’s transformation into a developed nation by its centenary of independence. This vision aims to elevate India’s economic, social, and environmental standing on the global stage. With a GDP growth of 7.6% in FY 2023-24, India has become the world’s fifth-largest economy. Contributing 16% to global growth in 2023, India is now playing a significant role on the world stage.

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The automotive industry has a 7.1% contribution to India’s GDP. The sector’s impact extends beyond economic figures, with a significant contribution in creating employment. As we approach the Union Budget 2024, there are clear expectations for further support to innovation and competitiveness in the auto industry.

Make India Prima-Donna of FDI Inflows: India is the world’s 3rd largest automobile market with a substantive consumption domestically and enjoying a 4.7% share in Indian exports. This is on the back of strong domestic demand, well-developed component manufacturing eco-system, and policy support from the Government of India. The sector has attracted cumulative equity foreign investment of US$ 35.40 billion between April 2000 and September 2023. Opportunity remains to make India the global leader in shared mobility by 2030, to gain leadership in heavy truck manufacturing (presently 3rd largest) & car (from #4), and drive the next wave of development on Electrical Vehicles. Of this only to meet India’s EV ambition by 2030 calls for an investment of US$180bn. 

The automotive industry expects stepped-up momentum in creating a conducive environment to boost Foreign Direct Investment (FDI) inflows. These measures could include greater allocation to the automobile industry under the PLI schemes, tax benefits linked to investment for EV and employment, and measures to streamline approval processes to enhance the ease of doing business. 

Winning in India’s EV Sector: India has made international commitments to reduce economy-wide emission intensity by 45% below 2005 levels by 2030. Further, Indian imports on account of oil add up to around US$ 100bn. A shift to Electrical Vehicles is not merely a solution to these challenges but also an opportunity to gain global leadership in a relatively nascent and fast-growing industry. 

With an EV penetration rate at under 1%, many factors need to come together to address the key blockers which according to a study by the Economic Advisory Council to the Prime Minster (EAC-PM) include high cost, range anxiety, limited model options and unknow resale value. While winning in Electrical Vehicles is admittedly not only going to be about budgetary support it is noteworthy that between 2009-2022 the Chinese Government poured US$29Bn into subsidies and tax breaks for Chinese EV manufacturers. 

In this budget the automobile industry would like for the Honorable Finance Minister to focus on facilitating creating charging infrastructure (India needs 1.3Mn vs around 13000 presently), Tax Rebates on leasing of Electrical Vehicles (solution for concerns on resale value) and mandate all new procurement by the government to be only electrical vehicles. What better way of persuading the common man than to follow our own leaders?

Innovation and R&D: Research and Development (R&D) investments are crucial for the success of the ‘Make in India’ campaign and for keeping India competitive on the global stage. The Union Budget 2023 underscored the importance of Artificial Intelligence (AI) by announcing the establishment of three ‘Centres of Excellence’ for AI to enable ‘Make AI for India’ and ‘Make AI Work for India’. Budget 2024 is expected to further boost R&D initiatives, particularly in areas such as advanced batteries, electric vehicles, and connected infrastructure. This focus on innovation will be key to driving technological advancements and fostering an environment of continuous improvement.

Enable Start-ups to disrupt more: Numerous innovations & disruptions have been germinated by our start-up industry in the automobile sector including strides being made in autonomous cars, hi-tech low-cost solutions to battery charging, affordable mobility solutions, Artificial Intelligence (AI) in consumer discovery and data-based solutions on financing, insurance, etc.  

India today ranks in the 40th position in the Global Innovation Index 2023; with the brain pool that India has, we should be aspiring to be in the Top 10. While we have successfully created a vibrant entrepreneurial fraternity there is more that needs to be done to unshackle the willingness to take risk. Trapping like “Angel Tax” (Sec 56(2) (viib) of Income Tax Act) needs to be urgently undone and the budget should set out a clear message about fostering trust between the Tax administrators and the Taxpayers. According to data from PrivateCircle Research as reported by Hindu Business Line, former employees of just one successful Indian start-up have founded around 44 start-ups with a cumulative valuation of US$25Bn (as of Feb 24). 

If steps are taken in this budget to remove dual taxation on ESOP (presently suffers both Perquisite Tax and Capital Gain Tax) it will put more money in the hands of younger Indians to convert their ideas into viable ventures, paving the way for India’s aspiration to be in the Top10 in the Global Innovation Index.

As concluding remarks and to steal a line from the auto industry, in an otherwise bumpy global doom & gloom, the Indian economy is very much on an auto-cruise mode. We hope to see Union Budget 2024 clear all roadblocks and provide the rocket fuel to accelerate our leap towards Viksit Bharat. 

(By Neelesh Talathi CFO at CarDekho Group)

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