ACMA: Budget could have an overall positive impact | SupportBiz

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ACMA: Budget could have an overall positive impact

While highlighting the focus on the manufacturing segment, the Automotive Components Manufacturing Association (ACMA) has welcomed the Union Budget.


The apex industry body expects this budget to bring joy for MSMEs, a key segment in the manufacturing vertical.

“In addition to manufacturing, we would also like to express our satisfaction for the thrust given to infrastructure development, upliftment of the rural economy and significant outlay for promotion of the social sector, including education, skill development and healthcare,” said Vinnie Mehta, Executive Director ACMA, while congratulating the Union Finance Minister.

Mehta also added: “It is a positive step for the industry as this budget has outlined concrete steps towards implementation of Direct Tax Code (DTC) and the GST. We do hope that these critical reforms are undertaken and implemented at the earliest.”

“MSMEs constitute over 70 percent of ACMA’s membership and access to capital has been one of the major constraints for the sector. We hope that setting up of the INR5,000 crore ‘India Opportunity Venture Fund’ will enable the sector access the much-needed capital. We are also happy that the weighted deduction of 200 percent on expenditure on R&D has been extended for another five years, which will motivate the industry to focus on innovations and new product development,” Mehta stated.

Emphasizing on the shortage of skilled manpower which has been an issue of significant concern to the industry, Mehta also said: “The introduction of weighted deduction of 150 percent on expenditure on skill development of employees will help in mitigating the concern.”

On the contrary, Mehta also mentioned that the enhancement of excise duty would adversely impact the prices of vehicles and in turn their consumption.

“This is of concern to the auto component sector as the sector grows in tandem with the vehicle industry. Further, this will also be detrimental to the fast growing auto components after-market, which accounts for over 20 percent of the overall auto component consumption. The aftermarket in India is highly price sensitive and is plagued by counterfeits,” he added.

Further, increase in customs duty on the ‘flat-rolled’ steel from five percent to 7.5 percent could unfavourably impact the auto component sector, as this is one of the key input materials for the industry. 

AM Muralidharan, Managing Director of Volvo India, also highlighted a different perspective of the impact of Budget 2012-13 on automotive industry.

Muralidharan said: “The implementation of the GST model will be watched carefully. With the government still in consultation with different states, we hope to see a practical road map for GST by August. This will be a huge boost for equipment manufacturers as it will reduce taxes on sales of equipment between states.”

He added: “Overall the budget resonates well with the verticals we cater to. In the coming year, I hope to see positive developments in the equipment manufacturers industry.”

However, he also acknowledged that the Union Budget 2012-13 has turned out well overall for the infrastructure industry. There are some good steps proposed in order to bring cheer to the infrastructure and equipment manufacturer segment.

The government’s plan to invest INR50,000 crore in infrastructure will encourage more projects on PPP model for massive infrastructure development.

“The signs for the road construction segment are very promising considering the government’s plan to invest INR10,000 crore and introduce external commercial borrowing. It has planned 8,800km of road construction, which will provide more avenues for projects.” Murlidharan concluded.