A Realistic Budget Without Frills

Dear friends,


Mr Arun Jaitley, Union Finance Minister has adopted a cautious and balanced approach and focussed on long-term growth prospects while presenting the Union Budget 2017. The automotive sector, which has been reeling under severe slowdown in the wake of demonetisation of high currency notes, was expecting the announcement of immediate relief measures in the Union Budget for its revival. The Union Budget 2017 falls short of the expectation in that there are no specific budget proposals giving relief to the auto sector or, for that matter, manufacturing sector.


We, in auto retail business, were anticipating slew of measures, including higher depreciation rates for motor vehicles and incentives for the scrapping of old vehicles. These support measures will have not only given boost to the struggling auto market, but will also have  had a significant positive impact on environment and road safety due to renewal of vehicle parc and modernisation of road transport fleet. We were also expecting an announcement for reduction in transaction charges payable by merchants in case of payments received through credit cards, which would have gone a long way in promoting the widespread use of credit cards and less-cash economy.


The Finance Bill 2017 proposes to amend Income Tax Act to prohibit cash transaction of more than Rs. 3 lakh, which is likely to have an adverse impact on rural market. The idea is good inasmuch as the proposal seeks to curb black money. There is no gainsaying that the rural people still use cash in a big way for sale & purchase transactions. We, therefore, feel that the proposal should have been implemented after 1 or 2 years when transactions through banking or digital medium are expected to become the norm and all-pervasive. 


All the same, the big push given in the Budget to the infrastructure development and renewed emphasis on rural & agriculture sector with substantially higher outlays, as also the 25.4% increase in central capital expenditure during the financial year 2017-18 will have ripple effect on the economy as a whole, including auto sector. Another comforting feature of the Budget is that the Fiscal Deficit for the year 2017-18 has been pegged at 3.2% without compromising on the outlays for various sectors and economic growth.


We hope, the Finance Minister will consider our suggestions, including suggestions for increased depreciation for motor vehicles and incentives for scrapping the polluting & unsafe old vehicles before the Finance Bill is passed by the Lok Sabha.
Adverting to the auto market, the vehicle sales seem to be picking up after being jolted by the demonetisation impact. The tempo of sales is nowhere near the pre-demonetisation buzz, though. I am hopeful that the buoyancy will return to the auto market soon.


As for activities of FADA since my previous column, you will be glad to know that FADA took a large delegation, comprising more than 40 members to participate at NADA’s 2017 Convention & Expo from 26th to 29th January 2017 at New Orleans, which also marked the completion of 100 years by NADA as the Voice of Dealers in USA since its inception in 1917. The FADA delegation also visited two auto dealerships in Atlanta to understand the business practices, working and revenue model of dealerships in US. It was an enriching experience for all the delegation members. The participation helped the delegation members learn and identify the good business practices that could be adopted by the dealerships in India for improving productivity, efficiency and profitability. It was also an occasion to celebrate. The visit under the banner of FADA also promoted fellowship between FADA and NADA, on one hand, and among the members of delegation, on the other. The visil also helped in building and deepening relations with other auto retail organisations in various parts of the world.
Please feel free to send your inputs and suggestions, if any.


With best wishes,


Yours sincerely,


John K Paul

 

 

 

 

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