Budget 2014: Indian SUV segment to be the major beneficiary of the proposed duty reductions, says Frost & Sullivan

Presenting the Interim Budget 2014, Indian Finance Minsiter P Chidambaram announced excise cuts to help the automobile industry to do better, as it is facing poor customer sentiments in the domestic market. Chidambaram announced the cut in excise duty on small cars and two-wheelers from 12 to eight percent and on SUVs from 30 percent to 24 percent. These changes will be valid till June this year. After that the Government will review, when the regular Budget is presented by the new Government that is coming to power.
Chidambaram also proposed three more industrial corridors: Chennai-Bangalore, Bangalore-Mumbai and Amritsar-Kolkata. The Interim Budget has provided Rs 246,397 crore on account of three main subsidies: Fuel, food and fertiliser and Rs 65,000 crore has been allocated for fuel subsidies.
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Reacting to the excise duty cut announcement, Frost & Sullivan, market consultancy firm, in a statement, said: “As far as the impact is concerned, SUV segment will be the major eneficiary of the proposed duty recutions. Retail prices are likely to be reduced by Rs 40,000 to Rs 50,000 crore. Vehicle sales is likely to increase in the coming three months”.
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Regarding the second announcement of central and state tax cut for exports, the statement added: “Further reduction in taxes will promote exports of vehicles. What is more, this will eventually help in overall cost optimisation for vehicle manufacturers”.
Overall, the Interim Budget announcement made by Chidambaram is positive, the statement added. In the overall analysis, Frost & Sullivan concluded: “Excise duty reduction announced today by the Finance Minister will be a saving grace for the automotive sector which has registered continuous dip in sales for the fourth consecutive month in January. Manufacturers are expected to transfer the benefits to the customers to promote sales. Overall the automobile sales are expected to register growth in the coming three months; the proposed measures will make a short term impact”.

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