Budget Reaction 2023: ICRA Limited

Shamsher Dewan, Senior Vice President & Group Head – Corporate Ratings, ICRA Limited

Automobile Industry: “Multiple proposals in the Union Budget are seen favourable for the automotive sector. A sharp 33% increase in capital investment outlay, identification of critical transport projects for first and last mile connectivity, and relaxation in personal tax rates shall aid the demand for the auto sector. Thrust on green energy continues with specific budgetary allocation for old vehicle scrappage, energy transition, and viability gap funding for battery storage solutions with 4000 MWh. Customs duty exemption on the import of capital assets for manufacturing lithium-ion cells for batteries used in electric vehicles shall facilitate EV ecosystem development and aid faster penetration. An increase in the duty rates on compounded rubber from 10% to Rs. 25 (or) 30 per kg, whichever is less, is a challenge for the tyre industry, which significantly depends on imported rubber.”


Commercial Vehicle: “The significantly higher allocation of Rs. 10 lakh crore towards capital investments and Rs. 79,000 crore towards affordable housing in the Union Budget of 2023-24 augurs well for commercial vehicle demand, especially the heavier multi-axle vehicles and tippers. The LCV segment would also benefit from the outlay of Rs. 75,000 crore towards improving first and last-mile connectivity for select sectors. ICRA also expects that the fund allocation towards scrapping of old government vehicles and extension of interest-free loans to state governments for the same would spur replacement demand, especially for buses. With green mobility identified as one of the priority areas, manufacturing, and adoption of alternative fuel vehicles, including electric vehicles, has also received an impetus.”