India Auto Inc, which has invested heavily in the safety and BS-VI technology upgrades as also the upcoming shift towards vehicle electrification, started witnessing a gradual slowdown in retail demand a year ago. This scenario has had a detrimental impact on the industry with major OEMs like Maruti Suzuki India, Tata Motors, Hero MotoCorp, Ashok Leyland, Nissan, Bosch and Sundaram Clayton announcing temporary plant closures to avoid build-up of inventory. Some have even reduced their workforce. The ripple effect has been on their suppliers, many of whom have also temporarily shut down operations.
Both apex industry organizations SIAM and ACMA have, since the past couple of months, urged reduction of GST from 28 percent to 18 percent to revive the domestic industry. Now finally, it seems the growing job retrenchments along with the industry in a deep distress situation has been noticed by the Central government. Now with Prime Minister Narendra Modi taking cognizance of the situation, the industry could look to see the much-needed revival in growth. It is understood that in a meeting held between prime minister Narendra Modi and finance minister Nirmala Sitharaman on August 16, the prime minister agreed that there is a strong need for growth revival and the government will go to any extent to get the economy back on track.
In his meeting with the finance minister, prime minister Modi is learned to have proposed a slew of measures, including a surcharge on the FPIs (Foreign Portfolio Investment) to be reversed as also long-term capital gain tax to be enhanced to 3 years. The prime minister, it is understood, is of the consensus that the government is worried about the job losses. It is also understood that the prime minister has asked the finance minister to bring down the GST rate to 18 percent across all the automobile segments comprising passenger vehicles, commercial vehicles, three-wheelers, and two-wheelers. The move will bring much-needed relief to India Auto Inc and act as a catalyst to sales, with the festive season beginning with the opening of September. While the official announcement of the GST reduction to 18 percent has not been made yet, it is expected to happen soon.