Author: Mr. Shailesh Chandra, MD, Tata Motors Passenger Vehicles Ltd. & Tata Passenger Electric Mobility Ltd.
Affirming its vision for a ‘Viksit Bharat’, the Union Budget for FY26 underscores the Government’s strategic emphasis on accelerating inclusive and holistic growth for the country. With a significant increase in capital expenditure, transformative changes in direct taxes to drive consumption, and comprehensive initiatives aimed at enhancing ease of doing business, stimulating manufacturing, and strengthening agriculture, the budget lays a strong foundation for sustainable economic growth, that the auto industry was seeking.
Spurring Market Growth & Expansion
Recognizing the role of consumer spending as a key driver of economic activity, the budget introduces significant tax relief measures and enhanced financial accessibility. The revised tax structure eliminates income tax liability for individuals earning up to ₹12 lakh annually, augmenting household disposable income. Additional initiatives like revamping the PM Swanidhi initiative with UPI-linked credit cards offering INR 30,000 limit and expansion of Kisan Credit Card (KCC) scheme, will drive increased consumption in both urban and rural markets. These fiscal measures will be instrumental in fueling the growing demand for passenger vehicles nationwide, while also enhancing accessibility for new car buyers.
Boosting the Auto Value Chain with a focus on EVs
To strengthen India’s role as a key player in the global EV supply chain, the budget proposes several strategic initiatives to promote self-sufficiency and localisation. The exemption of critical minerals like Cobalt powder, Lithium-ion batteries, Lead, Zinc, and 12 other essential minerals aims to ensure a stable, cost-effective supply for domestic manufacturing. Furthermore, the customs duty exemption on an additional 35 capital goods vital for EV battery production, alongside the Clean Tech Manufacturing initiative, underscores the Government’s dedication to positioning India as a global hub for electric vehicle and battery production.
Driving Innovation and Scaling
The government’s commitment to fostering technological excellence and skill development is evident in its substantial allocation to R&D and education of INR 20,000 crore. Strengthening the commitment announced in the previous Budget, the Five National Centres of Excellence for skilling will be key in enhancing youth talent and incorporating global expertise to strengthen the auto manufacturing sector in India.
Encouraging MSMEs
MSMEs are the backbone of India’s economy and a key driver of employment and innovation. The budget has several worthy proposals to boost this vital sector – improving access to credit, simplifying compliance requirements, and fostering technological advancement. The auto component sector being a significant contributor to India’s MSME landscape, will also benefit from these measures.
Enhancing Ease of Doing Business
By stating its intent to simplify direct taxation processes and to establish a High Committee for Regulatory Reforms, specific and progressive steps are being taken to enhance the ease of doing business. This will have a positive impact across the entire automotive value chain and their supporting ecosystem by fostering growth and innovation. Simplified taxation and regulatory frameworks will reduce operational complexities, while the establishment of the committee will ensure trust-based economic governance related to inspections and compliances.
Overall, the Union Budget for FY26 outlines a transformative roadmap for the country, particularly for the automotive industry, by aligning policy support with sectoral growth ambitions. By boosting consumer demand, strengthening domestic manufacturing, and promoting innovation in green technologies, the Government has laid the foundation for sustained long-term growth. As a result, the Indian automotive market is set for rapid expansion, with increased consumer involvement and a clear shift towards sustainable, electrified mobility solutions.
Published: 2 February 2025 | The Hindu Business Line
