Finance Budget 2015: Super-Flop For The Automotive Industry

The very first full-term budget of FY-16 laid down by the new central government was lack-luster for the automotive industry.

Many issues were raised in the past by the Indian automobile manufacturers, like the lowering of base interest rates on sale of cars, additional excise cuts, faster implementation of Goods and Services Tax but none of them seem to have been met apart from allocation of Goods and Services Tax.

The Finance Minister of India, Mr. Arun has stressed on the faster implementation of infrastructure projects to promote industrial growth in this budget.

Budget Details

• An assurance for speedy implementation of the Goods and Services Tax has been given by the central govt. which will bring it into effect from April 2016.This implementation will help to create an unbiased and uniform tax structure across all the various states of India.

• The excise duty was lowered by a narrow margin. Now it is 24%for the SUVs, 20% for the mid-sized cars and 27% for the large cars. For the smaller-sized cars, it has been hiked up from 12% to 12.5% this means that car prices will either remain the same or increase marginally, but will not decrease at any cost.

• Excise duty on the chassis for an Ambulance has been cut down from 24% to 12.5%.

• Corporate tax has been reduced (30% to 25%). This will help to indirectly promote growth within the automotive industry and will give them a chance to recover 5% of their funds. This tax-cut is expected to begin from next year.

• The custom duty for all fully built and imported commercial vehicles has been increased to about 20%.

• An impetus for production of green vehicles has been proposed to the tune of INR 75 crore under the Faster Adoption &Manufacturing of Electric Vehicles (FAME) scheme. The excise duty discount EVS will be maintained.

• The demand to ask banks and other financial institutions to lower the interest rate on vehicles and vehicular loans has not been secured.

• INR70,000 crore will be invested in laying of about one lakh Kilometres of asphalt roads across the country especially rural areas.

To summarize, this budget was really measly for the Indian automotive industry. Nothing has become cheap for the hardworking consumers. The companies can somehow hope to recover a lost revenues due to the cut in excise duty but that will amount to INR 1000 per car only.

For companies grappling to meet their demand-supply schedule, this isn’t enough. Only a miracle can now save the automotive industry from the current turbulent state it is currently in. The chump change allocated in this budget won’t make a very big difference!

The DNA Household Finances Strategy

Today, Canadians continue to rack up debt at an alarming rate. Canadians are proud that we rode out the recession with minimal damage. We forget that it left us unscathed, mainly because we borrowed and spent our way through it. Most countries reduced household spending and increased savings.

Canada’s household debt at an astounding 153 percent of disposable income is headed for the tipping point of 160 percent that the United States personal disposable income hit before its crisis, over three years ago. Interestingly, these days, Bank of Canada Governor Mark Carney, and Finance Minister Jim Flaherty are hoisting red flags about household debt, signaling that it is a huge risk to the financial system. However, they are part of the problem, and so consumers are not listening to them. Why should they? It is Canada’s record low-interest rate policy that is driving consumers to spend recklessly.

Sixty percent of Canadians polled recently by indicate that they are uncomfortable with their current debt level. A majority of the 2,929 respondents cited everyday expenses for their debt. Canadians continue to deflect responsibility for their decisions to credit, financial institutions, everywhere.

Mortgage rates are low and fueling excessive spending on residential homes. Average housing prices at twelve-times disposable income concerns me. In the previous housing crisis in the late 1980s, it was ten-times. What’s more, at the end of 2011, residential housing investment as a percentage of GDP was 7%, the same level as in the 1980s crisis; the 50 year average is 5.8%. In the U.S., in the mid 2000s, this ratio peaked about 6 percent, and housing crashed shortly after. As well, Japan’s housing market collapsed just after that ratio peaked in the 1980s. Will things be different here? I do not think so.

Many households are at risk, but few are doing anything about it. Still, they buy homes and consumer items with cheap credit. I suggest households embrace this DNA Household Strategy as the first step in behavior adjustment, before Canada’s impending personal financial crisis wallops many individuals.

Individuals in each household needs to declare detente, withdraw to the neutral zone, and then start to attack their debts.


Detente is the easing of hostility or strained relations, especially between countries. How does this apply to households? With whom do they have hostilities or strained relations? Individuals in households confront personal lifestyle choices daily. Cheap credit, seductive finances, fancy grown-up toys, tempt us continually. How can we resist unless we recognize this, and plan to deal with it?

That’s why I suggest each person should stand in front of a mirror to declare detente with him, her…you! You the spendthrift, you the impulsive buyer, you who like grown-up toys decide to stop hostilities against your credit. Stop it now! Agree to end the pulling and tugging, which credit wins every time.

Formalize this decision by signing a covenant indicating that for at least one year, you will refrain from using credit cards, credit lines; all credit forms. As well, agree not to buy consumer items unless you need them to fulfill a legal, moral, ethical, or health reason. Get a trusted friend to witness this agreement, and to hold you accountable to stay with it. This is the start of detente.

Neutral Zone

After signing this covenant, withdraw to the neutral zone to develop a new approach to lifestyle choices. First, cut up all credit cards and decide to start working with a spending plan. Next, resolve to use cash or checks only, and then, exclusively for items in your budget. In the neutral zone, you do not go shopping, respond to sales, deals, or tempting financing. When the urge to spend impulsively comes, read your detente statement, which you should have with you always. Remain in the neutral zone until you repay all consumer debts, and lower your mortgage to a comfortable level.


The third plank of the DNA strategy is the attack phase: start attacking your debts. First, prepare a debt repayment schedule, next, a material worth statement, and then, a plan to use to talk with your creditors.

A debt repayment schedule, as the name implies, lists your debts and shows this information: Amounts owing, creditors, interest rates, monthly, twice weekly, or other payment period, and expected dates when at current repayment, you will repay each debt.

Your material worth statement, akin to a balance sheet, lists all items you own at values someone would pay for each (market value), less your debts, to yield your net equity. Review this statement to see whether you could sell items to lower debts. You might conclude that you should sell your house to lower your debts and ongoing expenses and rent until your circumstances improved. These are major decisions. Discuss them with a trusted independent advisor; pray about them. Remember, you got in debt over an extended period, and so it is likely that you will get out over a long stretch. That’s why you must forget the home run, be patient, and stay with the program.

After doing these statements and your budget, you will know your financial health and will be ready to talk with your creditors about relief. Be humble, polite, and realistic. Financial institutions prefer dealing with you instead of debt collection agencies. If you are sincere, truthful, and have a well-thought-out plan washed in prayer, they are likely to give some relief on interest rates or amounts outstanding; most likely, interest rates.


No longer is the question, will we have a household debt crisis? It is, when will this happen? The answer is, probably in one to two years at the latest.

Canadians cannot continue the current rate of spending on consumer items with cheap credit. Housing activities cannot keep going at the present pace. Something must give. Interest rates must start creeping up. Are you ready for the storm?

Solve Funding Issues to Finance SME’s Growth Plans

SME’s are developing rapidly and flourishing enormously worldwide. Since its initiation and establishment, there some extremely important and basic requirements to be met and adopted. These requirements include; infrastructure and employment requirements, a developed information technology infrastructure along with funding sources, which is the most important aspect of the sustainability of these SME’s.

Funding sources are the strengthening pillars for such small and medium-sized enterprises.

SME (small to medium enterprise) is a convenient term for categorizing businesses and other organizations that are somewhere between “small office-home office” (SOHO) size and the larger enterprise.

Unavailability of timely and adequate funds has an immense adverse effect on the growth of these SME’s which in turn affects the growth of the Indian economy. Such insufficient funding sources serve as the crucial barrier in the development and sustenance of SME’s.

The economic development in India is hugely dependent on the performance of small or micro and medium enterprises. They are the powerhouse of innovation, entrepreneurial spirit and enormous talent, which is required for the nation’s development in the economic sector.

Indian SME sector:

This sector contributes to the industrial output, provides employment to masses. They also contribute widely in exports. These organizations produce quality products for national and international markets.

The presence of SME’s is greatly acknowledged. The manufacturing sector is rapidly advancing because of the contribution of these organizations.

Undoubtedly, these SME’s are performing their best, despite their limited sources. Still, there are multiple cases of these organizations facing funding issues.

The solution for funding issues faced by SME’s:

The government has been taking initiatives like setting up the National Manufacturing Competitiveness Council, announcing National Manufacturing Policy (NMP) and much more to energize and boost the manufacturing sector.

Banks have made stable strides to support SME’s. However, such approaches by banks for funding are limited and restricted because by controlling and managing risk, they ultimately create value. Thus, banks are not always a rightful solution as a funding source.Access to capital markets is rare, in the case of SME’s. Therefore, such organizations hugely depend on borrowed funds from some financial institutions and banks.

Mostly commercial banks provide extended working capital and financial institutions provide investment credits. Universal banking services, working capital, and term loans are becoming available for SME’s for funding.Meanwhile, the traditional requirements of finance are still actively in use, for creating the asset and working capital.Globalization is generating a demand for introduction and development new financial and support services.

The RBI should issue necessary guidelines to all banks on credit flow. Moreover, the Government should work rigorously to create an environment conducive for growth for the SMEs that restrains the need for capital and debt.

Setting up SME-targeted banks that provide priority to lending to the SME sector.

Financing schemes for SMEs can be formulated and be beneficial. These might be highly risky, but promises great returns. There is also a need for a reduction in the interest rates. SMEs has been paying high-interest rates for bank loans. The loan structure should restructure, on an urgent basis as lower interest rates are an extremely important need for SME’s.

Delayed payments are yet another major area of concern for SME’s that lead to reduced working capital.

Recycling of funds and various business operations are majorly affected due to delay in dues settlement. Defaulting customers are mostly large enterprises and the SMEs due to fear of losing business are not able to report against them.

An automated portal could be established by the government, wherein SMEs makes available their customer detailings.The government can also send automated reminders to defaulting organizations, in the cases of payment defaults.

As it is well known all over that, for the government, the Budget is an occasion to set up new financial goals and economic goals, allocate financial resources and provide policy directions. During Budget presentations, the Finance Minister announces new policies, schemes, projects and allocates finance for the development of several sectors of the economy, to meet the overall goals of socioeconomic growth.

For SMEs, the potential sources of finance are very limited. However, their usefulness is limited because of mostly practical problems. Crowdfunding also supplies chain financing are some funding sources.

Some more funding sources for SME’s

The owner, family, and friends of SME

An excellent source of finance. Mostly, such investors, invest not just for financial gains and are willing to accept lower returns than other investors. However, the key limitation, for most of these organizations, is that, that the finance they can build personally, from friends and family, is limited.

Trade credit

SMEs can take credit from their respective suppliers. It is however just short-term and, if the suppliers are big companies who have identified and categorized them as potentially risky SME, the possibility to extend may be limited, for the credit period.

The business angel

A wealthy individual who is willing to take the risk of investing in SMEs. However, they are just found in rarity. Once such an individual is interested they can become useful to the SME, as they have great business plans and contacts.

Factoring and invoice discounting

These sources help the organizations to raise finance. It is only short-term and is mostly more costly than an overdraft. However, with the SME growth rate, their receivables will grow thereby the amount they can borrow from invoice discounting will also rapidly growing.


Leasing assets is a better option rather than buying.them, as it avoids to raise the capital cost. However, leasing is mostly possible on tangible assets.


An SME can become quoted by acquiring a listing on the stock exchange. Thus, raising finance would become less of an issue. But before listing can be considered the organization must grow to the considerable size that a listing is feasible.

Supply chain financing