Auto industry welcomes budget, but demands more stimulus measures

February 16th, 2009 - 10:15 pm ICT by IANS  

New Delhi, Feb 16 (IANS) Though the interim budget has not announced any specific sops for the crisis-hit auto sector, the increased allocation for defence and surface transport ministry would boost vehicle sales, according to a leading industry lobby.

The higher outlay for the defence sector, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and the ministry of surface transport “could be used for funding the vehicle replacement programme and for boosting the purchase of new vehicles,” the Society of Indian Automobile Manufacturers (SIAM) said.

The Indian auto industry has recorded negative growth for seven consecutive months between July 2008 and January 2009. The passenger car segment during this period slumped 6.9 percent, while the commercial vehicle segment posted a mammoth 50.96 percent decline.

External Affairs Minister Pranab Mukherjee, who presented the interim budget on behalf of Prime MInister Manmohan Singh, allocated Rs.118.4 billion (Rs.11,842 crore) for the JNNURM for 2009-10.

The JNNURM was launched 2005 with an aim of improving urban infrastructure and alleviating the urban poverty. Since its inception, states have increasingly utilised the funding under the scheme to upgrade their transport infrastructure.

Mukherjee provided Rs.1.41 trillion (Rs.141,703 crore) for defence spending for the fiscal out of which Rs.548 billion was allocated for capital expenditure.

SIAM said although the current spending was likely to induce demand another stimulus package would be required for the sector.

“We hope the government would shortly come up with further fiscal and monetary measures to revive the growth including extension of earlier announced measures, thus addressing such sectoral measures that could not be a part of the interim budget,” the lobby said.

Industry experts, however, remained sceptical of the positive impact of the budget on the industry.

Auto analyst Murad Ali Baig said the promise was too small to bring any change in the plummeting sales, specifically that of the the commercial vehicles.

“It’s not necessary that increased defence spending will convert into sales of busses and trucks, neither can the JNNURM funding be directly attributed to sales in the coming days,” he told IANS.

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