The country's largest car maker Maruti Suzuki India (MSI) said policies that helped the auto industry grow at about 21 per cent in the last 12 months should be continued. "It will be too early to exit from stimulus measures as those were the main reasons of growth for the industry. It is too early to say that the auto industry has fully recovered (from the slump due to global economic crisis)," MSI Executive Officer Marketing and Sales Mayank Pareekh said.
According to Society of Indian Automobile Manufacturers (SIAM), total vehicle sales of 11,14,157 units, in India in January was at the highest ever sold in a month. Car sales were also at record high of 1,45,905 units. It was the 10th straight month of growth by the segment.
The good numbers notwithstanding, Mahindra & Mahindra Vice-Chairman Anand Mahindra said the government should be very careful on any withdrawal of stimulus packages. "It was not a very overwhelmingly large one like in China or in the US. It is a very very measured package."
The government had cut CENVAT by 4 per cent in December 2008 that resulted price reduction of automobiles and helped in spurring demand. Besides, states were encouraged to buy more buses for urban transport that gave a fillip to the commercial vehicles segment.
General Motors India (GMI) also felt that the industry is yet to see concrete signs of recovery from the battering it received during 2008-09. "Don't remove the stimulus which is helping India get ahead of most of the other countries...the industry is still not like in a solid pattern, so don't take anything away that could cause it to demise," GM India President Karl Slym said.
Support for continuation of the stimulus package has also come from the auto component manufacturing segment with the industry body, Automobile Component Manufacturers Association (ACMA) asking the government to continue with the status quo.
"Stimulus should not be removed in the immediate future. Although total auto sales may have zoomed, the commercial vehicle segment has still not fully recovered and exports are also below earlier high figures," ACMA Executive Director Vishnu Mathur said.
He also said the government needs to control the excise rate and avoid raising them. "We have also asked for a Rs 1,000 crore Technology Development Fund but this is a matter to be discussed after the budget is over," Mathur said. Some in the industry, however, say the writing is on the wall that the stimulus cannot go on forever. MSI Chairman R C Bhargava said the government will no doubt take steps to curb the deficit and removing part of the stimulus is likely.
"I don't believe that any government can continue with large, long term deficits. Deficit has to be controlled but the government should also look at cost cutting and other measures for reigning in deficit," Bhargava said. He added that the primary concern of the government should be to take growth to around nine per cent annually and improve the infrastructure.