The budget has four areas of thrust which can benefit the auto and auto-ancillary sector- promotion of EV and battery manufacturing, boost to MSMEs, incentives for skilling and research, measures to boost rural and middle-class consumption.
01 Feb 2025 | 11108 Views | By Sarthak Mahajan
Here's a detailed analysis of key focus areas in the Union Budget 2025-26, examining major initiatives across five crucial sectors with a special focus on the automotive sector.
EV and Battery Manufacturing Push
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Here's a detailed analysis of key focus areas in the Union Budget 2025-26, examining major initiatives across five crucial sectors with a special focus on the automotive sector.
EV and Battery Manufacturing Push
The budget continues its commitment to making India a hub for electric vehicle and battery manufacturing. A comprehensive Clean Tech manufacturing support program has been announced to improve domestic value addition in solar PV cells, EV batteries, motors and controllers. The initiative includes 35 additional capital goods for EV battery manufacturing being added to the exempted list.
The focus extends to building the entire EV ecosystem, including support for battery recycling and creating charging infrastructure. Special emphasis is being placed on developing high-capacity batteries and promoting research in battery technology.
Agricultural and Rural Economy Boost
The budget introduces transformative measures for agriculture, including the Prime Minister Dhan-Dhaanya Krishi Yojana covering 100 districts and likely to benefit 1.7 crore farmers. A comprehensive 6-year Mission for Aatmanirbharta in Pulses focuses on three key pulses - Tur, Urad and Masoor, with assured procurement guarantees.
The rural economy gets additional support through India Post's expanded role as a catalyst, offering various financial and digital services. A comprehensive multi-sectoral 'Rural Prosperity and Resilience' programme aims to address under-employment in agriculture through skilling and technology adoption.
These measures are liekly to lead to increased demand in rural areas for basic two-wheelers and entry-level cars.
Skills, Technology and Innovation
The budget places significant emphasis on building India's innovation and R&D capabilities while enhancing youth employability, which can give a boost to the aurto sector, particularly to auto componment manufacturers. Five National Centres of Excellence for skilling will be set up with global expertise and partnerships. The allocation of ₹20,000 crore for Research, Development and Innovation initiatives marks a major push for private sector-driven innovation.
Fifty thousand Atal Tinkering Labs will be established in government schools over five years, while ten thousand PM Research Fellowships will support technological research at IITs and IISc. The budget also introduces a new Centre of Excellence in AI for education with ₹500 crore outlay.
MSME and Micro Enterprise Support
The budget significantly expands support for MSMEs through enhanced credit availability and easier compliance requirements, giving support to the auto components sector which makes uop a large chunk of India's MSME base. Credit guarantee cover for MSMEs has been doubled to ₹10 crore, while new classification criteria provide greater flexibility for growth. A special scheme for micro enterprises introduces credit cards with ₹5 lakh limit, targeting 10 lakh enterprises in the first year.
The Focus Product Scheme for labor-intensive sectors like footwear and leather aims to generate substantial employment and export opportunities. The scheme is expected to facilitate employment for 22 lakh persons and generate turnover of ₹4 lakh crore.
Spurring Consumption
The budget introduces significant measures to boost consumer spending and support the middle class, marking one of the most substantial tax relief packages in recent years. The new tax regime provides complete tax exemption up to ₹12 lakh income (₹12.75 lakh for salaried taxpayers), substantially higher than the previous ₹7 lakh limit. This move is expected to leave more disposable income in the hands of the middle class, potentially boosting consumption across sectors.
For rural consumers, enhanced credit availability through Kisan Credit Cards (KCC) with increased loan limits from ₹3 lakh to ₹5 lakh will provide additional purchasing power. The PM SVANidhi scheme for street vendors has been revamped with enhanced loans and UPI-linked credit cards with ₹30,000 limit.