The Indian government’s recent fiscal stimulus packages have disappointed the auto industry except the commercial and heavy vehicle segment. As per the packages, the Indian government and the Reserve Bank of India has released a series of measures to revive the economy. They are making loans cheaper for homes and industry, boosting infrastructure spending and offering tax breaks to some businesses which are in trouble. But the auto industry was excluded from the list.

 

Today's announcement was the second and final round of the fiscal stimulus package, soon after the RBI announced cuts in repo and reverse repo rates and cash reserve ratio to fight the economic slowdown.

 

The stimulus 2.0 package has announced that the PSU banks are likely to provide a line of credit to NBFCs for purchase of commercial vehicles. Also an accelerated depreciation of 50 per cent will be provided for commercial vehicles to be purchased between January 1 and March 31, 2009.

 

As a one-time measure, states will be given support to purchase buses for their urban transport systems. The package has somewhat overlooked the liquidity crisis being faced by the auto component industry amongst whom a majority who are exporters are suffering from the lack of line of credit.