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Business News/ Politics / Policy/  Chidambaram offers growth stimulus by cutting excise duty
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Chidambaram offers growth stimulus by cutting excise duty

Chidambaram announces reduction in excise duties on automobiles, capital and consumer goods in interim budget

Finance minister P. Chidambaram cut excise duty on small cars to 8% from 12%. Photo: MintPremium
Finance minister P. Chidambaram cut excise duty on small cars to 8% from 12%. Photo: Mint

New Delhi: In a bid to revive growth, finance minister P. Chidambaram announced a reduction in excise duty on automobiles, and capital and consumer goods.

Through this growth stimulus, Chidambaram has effectively put the ball back into the Reserve Bank of India’s court, which has been tightening monetary policy to contain inflation.

This interim budget of the United Progressive Alliance government is its last before the general election due by May.

The Central Statistics Office has projected manufacturing to contract 0.2% in 2013-14 for the first time since 1991-92, when it shrank by 2.4%.

However, Chidambaram did not propose any changes in direct taxes. ​

Chidambaram cut excise duty on capital goods to 10% from 12%, while on small cars it was reduced to 8% from 12%. Excise duty on sports utility vehicles has been cut to 24% from 30%, while on large and mid-size cars, the levy was reduced to 20% from 27%.

To encourage domestic manufacturing of mobile handsets, Chidambaram reduced excise duty on them to 6%.

The 2% drop in excise duty for consumer goods is likely to provide relief to the sector that has been reeling under cost pressures due to high inflation and raw material costs. Prices of air conditioners, washing machines and other kitchen appliances are expected to come down by 2%.

“It’s a welcome change for the industry. This should help ease off pricing across all categories by the same margins. Prices of all durable goods have been rising exorbitantly for the last two years. This drop will get passed on to the consumer definitely. If not boost growth phenomenally, it’ll bring a positive sentiment to the industry," said Kamal Nandi, vice-president, sales and marketing, Godrej Appliances.

“This indicates that the government is keen to stimulate growth across sectors," said Shantanu Dasgupta, vice-president, corporate affairs and strategy, Whirpool of India Ltd. “Now that there is a relief in excise, it will ensure there is no upward movement in pricing pressure."

Vidhi Choudhary contributed to this story.

For the complete budget speech, click here

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Published: 17 Feb 2014, 12:47 PM IST
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