In line with the subdued demand witnessed in the auto industry, the auto ancillary industry also went through tough times in FY09.
In fact, with a significant part of the revenues for the industry also coming from exports to the developed markets, which remained in shambles, it will not be wrong to say that the Indian auto ancillary industry suffered even more than the auto industry.
However, some respite was provided to players with strong positioning in the replacement market as demand in this market remained robust on account of strong OEM auto sales in the previous fiscals. Going forward, while domestic markets have begun to look up, uncertainty continues to plague exports.
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Reduction in excise duties in select segment of automobiles |
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Fringe benefit tax (FBT) abolished. |
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Rate of minimum alternate tax (MAT) on book profits has been increased from 10% to 15%, but with a provision of carrying forward the tax credit on MAT to ten years from the current seven years. |
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Higher allocation towards defense and agricultural credit |
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A weighted deduction of 150% for expenditure relating to in-house research and development will be extended |
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Higher defence and agri credit allocation will encourage new vehicle buying which in turn will benefit the industry players. |
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Increased thrust on road infrastructure is a positive for all the automobile manufacturers especially passenger vehicles and CVs. This in turn will drive demand for auto components. |
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As the Indian auto ancillary industry becomes more sophisticated, weighted deduction on R&D will further incentivize players to spend more on R&D. |
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Excise duty reduction in certain segments of automobiles will help all the players in the industry. |
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Weighted deduction on R&D expenses is a positive for players like Bharat Forge that have increased their thrust on in-house research and development. | |
