Stimulus package has done nothing to spur demand, says Maruti's Bhargava

Reacting to the government's Rs 20 lakh crore coronavirus relief package for the economy, India's largest carmaker Maruti Suzuki said it does not have anything to spur demand in the economy which has been battered by the over 50 day lockdown.

"The Prime Minister in his speech on May 12 had mentioned five pillars as the focus area of the relief package and one of the them was demand. But nothing has been specifically done to address that," said R C Bhargava, chairman, Maruti Suzuki India Ltd. "Possibly the intention is that all the money that is being made available to different sectors and MSMEs will create demand. All of this will take time."

Even before the pandemic forced all sections of the economy to virtually come to a standstill, the automobile industry was in the midst of its worst ever protracted slowdown in over two decades. It hit a new low last month when the industry could not sell even a single car or two wheeler as all dealerships and factories were shut for the entire month.

Also Read: Coronavirus crisis: Traders 'angry, disappointed' with relief package, demand PM Modi's intervention

"The immediate concern of the government was to address problems with the small industries, SMEs, the issues with migrant labour and farmers. Frankly, I do not think the intent was to deal with the larger industrial problems at all," he said.

The long standing demand of the industry to bring down taxes on cars and two wheelers have once again been ignored by the government. Bhargava said reducing the taxes right now would not have served the purpose anyway as production is low but said the concerns of the industry should not be ignored for long.

Also Read: Stimulus package 2020: Immediate relief worth Rs 80,000 cr only; combined fiscal dent to be 12%: CARE Ratings

"In the longer term, unless the automobile industry grows, you will not achieve the targets you have set for overall manufacturing sector. The auto industry constitutes almost 50 percent of the manufacturing in the country and taxes on cars are way above international levels even though the cars are of the same standard in terms of safety and emissions as abroad," he said.

"In Europe the cars are taxed at 19 per cent. In Japan it is at 10 per cent. In India a small car is taxed at 29 per cent and on bigger cars it is between 45-50 per cent. On top of this you have road tax which varies from 4-20 per cent depending on the state."