It's great that India has pioneered the world's cheapest car. This feat must be terribly difficult especially in India due to its skewed tax structure. In most manufacturing/importing countries a standard Honda Accord costs equivalent of Rs.1-1.1 million (USD 22,000). For that model we pay Rs.1.6+ million (USD 34,000). A BMW 5 Series costs Rs.2.3-2.4 million (USD 48,000), but in India it sells for Rs.5.5 million (USD 110,000), etc. This equation is true at the lower end, too.
The thought of taxing cars high is the inheritance from people who thought like the poor - probably rightly so 60 years ago - but its relevance is lost to the people who want to create wealth, not just realign it. Taxes on 'luxury' goods are aimed to redistribute wealth. We do need Robinhood mechanisms to transfer some money from the wealthy to the poor, but we need to redefine who is wealthy and also redefine the mechanisms.
A material reduction in import duties and excise duties on cars will lead to greater production and thereby greater employment. With low cost of labour, steel and other ingredients, India could be a preferred low cost producer for world's leading car companies, especially at a time when most of these companies are making losses. We can certainly be cheaper than likes of Mexico and Thailand, who already enjoy the status of preferred car manufacture locations.
Coz we need to protect our high-cost, low-efficiency industry. reasons for these could be many but the fact is our domestic industry is still not ready for a free-for-all competition. some level of protection is definitely called for but how much - that's debatable and depends upon whether you debate as a consumer or as an employment protectionist :-) However, I agree that rationalisation of duties and a gradual phase out of protectionist policies will make Indian industry and economy in general, more competitive and self sustaining.
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