India’s automobile makers want the government to reduce excise duty on large cars and want the excise duty structure on small cars to remain unchanged. The reason for demanding this favour? Car sales are plummeting and this is just about the time when preparations for the 2012-13 budget kick off.
The woes of any industry, more so one in the private sector, are its own problem. So far, the government has been kind to this sector: in 2008, it reduced excise duty to prop demand.
There is no case, at all, for artificially propping demand for cars of any size, leave alone the gas guzzling variety. At the moment, the government is in danger of missing its fiscal consolidation target even as the global economy is heading for trouble. Under these conditions of uncertainty, it’s best if the government saves money for a rainy day when it may need to boost demand in other sectors of the economy needing greater help.