SIAM claims that the economic package does not appear to be likely to boost auto demand in the country

Mumbai, May 19, 2020, Tuesday

The economic package announced by the government will not boost auto demand, according to the Society of Indian Automobile Manufacturers (SIAM), an organization of the auto industry. Finance Minister Nirmala Sitaram announced a phased package of Rs 20 lakh crore in five days from May 16 to 17.

There is an urgent need for stimulus to boost demand in the auto sector

Although the relief given to the agriculture sector is expected to indirectly benefit the auto industry, there is an urgent need for stimulus to boost demand in the auto sector which has not been met, SIAM sources said.

In the financial year 2020-21, the growth rate of the auto sector is expected to be between 10 and 20 per cent negative. He also said that direct government intervention was needed to stem the declining employment in the auto sector and increase demand.

Dealers need financial support and the sector needs to be covered in the definition of MSMEs, the sources said. The automobile industry is expected to be hit by more than Rs 1 lakh crore due to the lockdown imposed in India following the outbreak of the corona virus. Most of the auto plants in the country were completely shut down for about 90 days from March 30. However, auto plants are now re-operating at a slower pace in some areas.

It is also the turn of the government to lose Rs 20,000 crore in goods and services tax revenue due to the halt in vehicle production. Besides, the revenue revenue of the states was also projected to decline by Rs 15,000 crore.

The government has allowed automobile companies to start operating at certain plants, but companies say there is no point in creating new goods when the showroom is closed. Also, no one is currently shopping.

The automobile industry accounts for 12 per cent of the government's total GST revenue. Vehicle sales in the June quarter are expected to be lower than in the same period last year.