Localising production of crucial EV related components is crucial for building a robust domestic ecosystem, but that won’t be enough for India to have a globally competitive EV industry. Finance Minister Nirmala Sitharaman presented her record eighth consecutive Union Budget today. There wasn’t any mention of the auto industry in her speech, but here are 5 things in her speech that would also help the auto industry, if executed correctly and timely.
Of all that Finance Minister Nirmala Sitharaman spoke about during her nearly hour and a quarter long speech, what would perhaps caught the larger populace of India’s attention the most would be the increased rebate on income tax under the new regime.
1. More disposable income The FM proposed to increase the rebate for the resident individual under the new regime, to a total income level of up to INR 12,00,000, from the current limit of INR 700,000. This would leave people with more disposable income, which potentially will have a positive impact on automobile sales, particularly commuter two-wheelers.
2. Support for local EV ecosystem EV industry stakeholders, particularly battery manufactures, would have particularly appreciated the part of the FM’s speech where she said, “To the list of exempted capital goods, I propose to add 35 additional capital goods for EV battery manufacturing”. Another set of 28 additional capital goods for mobile phone battery manufacturing are also proposed to be exempted form BCD. This two-pronged announcement bodes well for localising Lithium-ion battery production, both for mobile phones and electric vehicles. The above can potentially help India in her quest to be a major hub in the global megatrend of electric vehicles.
3. Focus on clean tech for ‘climate-friendly’ development EVs are just one part of the new-age technology bouquet which can contribute significantly to India’s target of achieving carbon neutrality by 2070. As part of the planned National Manufacturing Mission, the Government will also focus on clean tech manufacturing. Details weren’t mentioned, but the Finance Minister said that “this will aim to improve domestic value addition and build our ecosystem for solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines, very high voltage transmission equipment and grid scale batteries.” The FM announced that the Government “will set up a National Manufacturing Mission covering small, medium and large industries for furthering “Make in India” by providing policy support, execution roadmaps, governance and monitoring framework for central ministries and states.”
Timely, and well thought out steps in executing the above plans will be extremely crucial for them to qualify as ‘walking the talk’..
4. Building a skilled workforce Localising production of crucial EV related components is crucial for building a robust domestic ecosystem, but that won’t be enough for India to have a globally competitive EV industry. An adequately skilled workforce of the required scale for the new technology is equally important. Same for the other emerging technologies such as Hydrogen, Flex fuel, which the Government also is focusing on.
The FM also announced the plan for a Centre of Excellence (CoE) in Artificial Intelligence for education, which will be set up with an investment of INR 500 crore. This announcement is in addition to the earlier announced three CoEs in Artificial Intelligence for agriculture, health, and sustainable cities in 2023, Following up one her announcement in the Interim Budget in July ‘24, the FM announced that “Five National Centres of Excellence for skilling will be set up with global expertise and partnerships to equip our youth with the skills required for “Make for India, Make for the World” manufacturing.”
The plan for additional infrastructure at five IITs (Indian Institute of Technology) started after 2014 to facilitate education for 6,500 more students may also have a positive bearing on the overall ecosystem.
5. Creating a conducive environment for innovation To succeed in an increasingly technology-intensive era, in auto and other sectors too, innovation is imperative. And, for that to happen, a conducive environment for advanced R&D is a must. The idea of ‘Atal Tinkering Labs’ may contribute significantly towards cultivating that. environment. Details weren’t announced, but the objective “to cultivate the spirit of curiosity and innovation, and foster a scientific temper among young minds” will help propel India to become a ‘developed nation’, with its auto industry also as a beneficiary.
Many of the young minds may grow up to be start-up founders. And talking about start-ups, the Union Budget also proposed to ‘extend the benefit provided under Section 80-IAC to startups for another period of five years’, which in other words means that the benefit will be available to eligible start-ups incorporated before 1st April, 2030.
At the broader level, the highlights mentioned above could make significant contribution to the automotive industry also. However, the final contours, and the executive roadmap will be equally important for the plans to deliver the goods.
