Excise duty for small cars, scooters, motorcycles and commercial vehicles will come down to 8% from 12% while SUVs will attract excise duty of 24% as against 30% earlier
Prices of automobiles, including cars, sports utility vehicles (SUVs) and two-wheelers, are set to come down with Finance Minister P Chidambaram announcing a reduction in excise duty in the Interim Budget 2014.
“To give relief to the automobile industry, which is registering unprecedented negative growth, I propose to reduce excise duty,” Chidambaram said.
Excise duty for small cars, scooters, motorcycles and commercial vehicles will come down to 8% from 12% earlier. SUVs will attract excise duty of 24% as against 30% earlier.
Excise duty on large cars will now be 24% compared with 27% earlier, while the duty on mid-sized cars will go down to 20% from 24% previously.
The excise duty cut will be applicable up to 20 June 2014.
Annual car sales in India declined for the first time in 11 years in 2013, posting a 9.59% dip, as the auto industry reeled under a prolonged demand slump due to the economic slowdown.
According to the Society of Indian Automobile Manufacturers (SIAM), domestic car sales last year fell to 18.07 lakh units from 19.98 lakh units in the previous year.
The slump in sales continued in January as car sales fell for the fourth straight month with a decline of 7.59% to 1.60 lakh units from a year earlier.
The Indian government will need to continue to prune its spending in the next year as well to meet its budgeted fiscal deficit target. Therefore, the trend of forced fiscal austerity will likely continue next year, says Nomura in a research note
The Indian government has managed to improve upon the stated fiscal consolidation target in FY14, partly by pruning expenditure and partly by postponing payments, says Nomura in a research note.
“The government will need to continue to prune its spending in the next year as well to meet the budgeted fiscal deficit target. Therefore, the trend of forced fiscal austerity will likely continue next year. The true and final picture on the fiscal front will be known only in July following the elections,” Nomura said.
The government presented the interim budget (or vote on account) on Monday. A vote on account is a special constitutional provision by which the government has Parliament vote to secure funds for essential expenditures for part of the next financial year. The final budget will be presented sometime in June/ July when the next government is in place (after the elections).
The government set the revised estimate for the FY14 (year-end March 2014) fiscal deficit at 4.6% of GDP, which is better than the budget estimate of 4.8%. Despite the substantial slippage on the revenue front, the government cut its spending by Rs750 billion (relative to the budget target) in order to lower the fiscal deficit. In FY15, the government has set a fiscal deficit target of 4.1% of GDP, marginally better than expected (4.2%).
The government expects nominal GDP growth of 13.4% y-o-y in FY15 after 11.9% growth in FY14.
Beyond presenting the specifics of the budget, the Finance Minister also presented the intentions of the current government, in the event that it returns to power following the elections. The Finance Minister stated that the current government intends to remain committed to the National Food Security Act, fiscal consolidation (targeting a deficit of 3% of GDP in FY17), the rebuilding of infrastructure, pruning subsidies to only those that are necessary, skill development and the passage of the goods and services tax and direct tax code.
You can expect to get yield of nearly 10% for AAA rated bonds maturing in the next three years. Bond yields have remained unchanged over the past couple of weeks, despite the hike in the repo rate by 25bps, to 8%, by Reserve Bank of India (RBI) on 27th January.