Budget 2021: Here’s what the Indian bicycle and e-bike sector expects from FM Nirmala Sitharaman

As Finance Minister Nirmala Sitharaman presents her first budget in a post-COVID economy, she has her task cut out. With a devastating year right behind us, the country is reeling under the economic impact of a global pandemic that sent millions of people out of work and business.

From reviving a recession-hit economy, generating jobs to ensuring adequate social sector and healthcare spending — the Union Budget needs to balance multiple priority agendas without compromising on any.

As the GDP shrunk over the past year, employment, too, contracted for the third straight quarter of FY 20-21. In the October-December quarter, employment shrunk by 2.8 percent, and by the end of December, employment figures stood at 14.7 million less as compared to December 2019.

The thrust of this first post-COVID budget must, inarguably, be on reviving the economy, creating jobs, and finding ways to generate more income, which, in turn, will revive the falling consumer demand.

Boost to manufacturing

The Union Budget must give a policy boost to the government’s Aatmanirbhar Bharat initiative that aims to strengthen India’s manufacturing sector and make it globally competitive.

India’s manufacturing sector not only need to make the country self-reliant in production but also prepare itself to grab a larger share of the global exports.

Globally, a manufacturing shift is taking place away from China with a large number of organisations looking to diversify their production bases beyond one country. This is, therefore, an appropriate time to boost India’s manufacturing sector through enabling policies that improve its export competitiveness under the Aatmanirbhar Bharat initiative. 

The budget must also create pathways to improve ease of starting and doing business by enabling single-window clearances and reforming the complex GST structure. The government must also give due consideration to simplify the GST structure and reduce the multiple slabs down to three.

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Time to support India’s bicycle exports

By unleashing behavioural changes among people vis-a-vis public transport, the COVID-19 pandemic has provided a major boost to global bicycle demand. The global bicycle market is estimated to be a Rs 4.4 lakh crore market this year, with demand for traditional and electric cycles soaring like never before.

Interestingly, for India’s robust bicycle sector, this is an opportune time to widen its tentacles beyond the local Indian market and grab a larger share of the global exports.

At present, India’s share in the global bicycle exports is less than one percent, with a majority of Indian bicycle exports happening to African countries. In 2019, India is estimated to have exported bicycles and its components worth $400 million.

In contrast, China exported $2.9 billion — accounting for 32.4 percent of the total global bicycle export — while Taiwan exported $1.4 billion — accounting for 15.3 percent of the total bicycle export.

A large manufacturing base and availability of low-cost labour gives India the much-needed potential to scale-up manufacturing and increase its share in exports as the global bicycle and e-bike market surges ahead.

Unfortunately, Indian bicycle manufacturers face a significant cost disadvantage, particularly against Chinese players. China offers major policy support and incentives to its exporters, giving them a wide cost advantage in the international markets.

Notably, Chinese products are priced up to 15-20 percent lower than Indian products, putting Indian manufacturers at a price disadvantage.

Thus, the bicycle sector expects the Indian government to extend its production-linked incentive (PLI) scheme under the Aatmanirbhar Bharat initiative to bicycles, e-bikes, and their components to help the sector manufacture at globally competitive prices.

A 20 percent production-linked incentive for five years will not only help the bicycle and e-cycle segment plug technological gaps but also achieve economies of scale and competitive advantage.

Similarly, we also seek to extend the incentives under the Scheme for Promotion of Electronic Components and Semiconductors to electric bikes and components. These measures will help Indian bicycle sector produce globally competitive products, and grab a major share of the rapidly growing bicycle export market.

Make no mistake, the Indian bicycle sector has the potential to become an international manufacturing and export base. What it needs is a series of supportive policies to gain momentum and scale-up manufacturing for the world.

Locally, the government must also consider slashing GST, particularly on low-end bicycles. At present, bicycles are taxed at 12 percent GST, reducing the same to five percent can make them more affordable to a larger consumer base, particularly in rural areas, where demand has slid in recent months.

Boosting bicycle usage in rural areas through policy initiatives such as subsidy support will also help spur economic activity and create new avenues for income in rural areas.

For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or budget.yourstory.com