NEW DELHI, Feb 12 (Reuters) - Sales of passenger cars and utility vehicles in India are expected to grow by as much as 12 percent in the fiscal year starting April 1, the country’s automotive body said on Friday, higher than the 8 percent growth estimated for the current year.
An expected revival in rural spending, which was hit by poor farm output due to drought, will push passenger vehicle sales higher, Vishnu Mathur, director general at Society of Indian Automobile Manufacturers (SIAM) told reporters.
Prime Minister Narendra Modi is under pressure to increase welfare spending in India’s upcoming union budget to mitigate losses farmers suffered in the past two years. This is likely to boost rural spending which would help increase demand for consumer durables and automobiles.
“All these schemes will have a trickle down effect. They improve the purchasing power, the income level of people in rural areas,” said Mathur, adding he also expected better rainfall this year which would boost the rural economy.
About a third of passenger vehicle sales and more than half of two-wheeler sales in India come from rural areas, says SIAM, where automakers Maruti Suzuki India Ltd and Hero MotoCorp have a large network of dealers.
To further boost sales, SIAM, in the union budget, is seeking a reduction in excise duty tax on big cars to 20 percent from as high as 30 percent today, Mathur said.
It also hopes the government will announce incentives to encourage owners of old vehicles to scrap their trucks or cars which would help reduce pollution and enhance safety.
India’s passenger vehicle sales in the first 10 months of the current fiscal year ending March 31 rose by 8.1 percent to 2.3 million, helped mainly by new car launches and discounts.
However, car sales in the month of January fell by 0.7 percent - the first drop since October 2014, which Mathur said was a temporary blip.
“Growth is a little fragile right now. We do expect that the overall market is only going to improve and if the rural markets come back on track there will be robust growth,” he said. (Reporting by Aditi Shah; Editing by Mark Potter)