Auto industry welcomes rate cut

New Delhi, April 17 (IANS) The Indian automobile industry, which struggled with a sluggish market last year due to high interest rates, Tuesday welcomed the Reserve Bank of India's (RBI) decision to cut key lending rates by 50 basis points, saying the move will boost buyers' sentiments.

"Its a positive step as 70 percent of all retail sales in the sector happens through finance. However, how much will the cut help sales will depend upon how much of the RBI's cut translates into cheap and easy loans," Shashank Srivastava, chief general manager, marketing, Maruti Suzuki, told IANS.

The RBI in its annual monetary policy for 2012-13 has cut some key rates by 50 basis points in an effort to push industrial growth and stimulate economy -- a move that may see interest rates falling on housing, automobile and commercial loans.

Other industry players said they expected sales to pick up as a result of the rate cut.

"Since inflation has moderated, repo rate reduction was on expected lines. It's a welcome step and market should improve going forward. Volume of both petrol and diesel vehicles should pick up soon," said P. Balendran, vice president, General Motors India.

The Bombay Stock Exchange's (BSE) auto index rose by 82.59 points at 10,371.53 in Tuesday's trade.

However, SIAM (society of Indian automobile manufacturers) cautioned that the rate cut may not immediately translate into sales growth as it comes on the back of the budget proposal to increase excise duty on automobile sector.

"It is a positive move, but we have to wait and watch what happens as the budget has hiked excise duty," Vishnu Mathur, director general, SIAM, told IANS.

Finance Minister Pranab Mukherjee in the budget for fiscal 2012-13 proposed to raise excise duty from 22 percent to 24 percent on petrol cars with engine capacity of under 1,200 cc and diesel cars with engine capacity under 1,500 cc whose length exceeds four metres.

The Indian automobile industry is expecting a 10-12 percent rise in sales in fiscal 2012-13 from the 17,376,624 units sold in 2011-12 on better macro-economic conditions, an industry body said.