The hustle and bustle to buy new vehicles on Dusshera day was missing in Goa. It could be because of two factors. One, buyers are anxiously awaiting the government’s announcement of the 50 per cent road tax cut to be notified, and two, the slowdown in the auto industry continues to haunt
the sector.
The State Government last week made an extraordinary announcement of slashing road tax for three months from October to December. The keenness to support a badly hit auto sector was very much visible. But, some worrying trends have not been considered while
arriving at such a decision.
In the previous few weeks, several car manufacturers have offered a hefty discount. In some cases, the discount was as high as Rs 2 lakh on cars costing Rs 10-plus lakh. Nonetheless, such heavy discounting has failed to attract buyers and sales kept on falling. If people were not keen to buy cars despite the huge discounts on offer, a valid question to ask is: Will they buy now when the government reduces the road tax?
The tax cut was indeed seen as a solution for the problems of the auto sector a while ago. But the slowdown has worsened to such an extent that there is scepticism about cut in road tax helping auto sales. The logic is that the overall economic recession is so severe that people are not buying anything. They are not buying consumer durables, they are not buying electronics and even real-estate has shown a slowdown. And, this is because they don’t have sufficient
money in their hands.
There is a level of uncertainty that has crept in the job market too across the nation, including Goa. Even if there are jobs, cost-cutting by companies has ushered in insecurity at the workplace. Employees are not sure of latching on to a better job in the short run. In such a situation, people are unlikely to use their savings to buy a car or a two-wheeler.
There is however a section of people, who will go for a new car or a bike with a reduction in road tax. These are mostly the affluent class, who have money and who were waiting for the tax cut to happen. Therefore, it is expected that sales of premium cars may see a hike,znot the
other segments.
From the government’s perspective, it appears that there is not enough number crunching done on the move to slash road tax. While the proposal awaits the Finance Department’s nod, the loss in revenue after tax cuts and the expected hike in auto sales have to be carefully analysed. If overall sales of the auto sector don’t improve, the government’s revenue through road tax may come down. And this would be disastrous in a grim fiscal situation that the State is currently in. The situation with economic slowdown is so dynamic that the government will have to thoroughly apply its mind before coming out with any half-baked solutions.
