Budget 2025: From GST Reforms To Fixing Manufacturing Gaps, EV Sector Expectations This Year

The EV sector is poised for significant growth, with Union Minister Nitin Gadkari projecting the market's value to reach Rs 20 lakh crore by 2030, creating an estimated five crore jobs.

India’s EV policy framework has been significantly shaped by the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, launched in 2015.

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Budget 2025: The Union Budget for 2025-26, set to be presented in February by Finance Minister Nirmala Sitharaman, is highly anticipated by various sectors, with the electric vehicle (EV) industry at the forefront of expectations. Policymakers are expected to introduce initiatives that could drive the transition to greener mobility in India.

The EV sector is poised for significant growth, with Union Minister Nitin Gadkari projecting the market's value to reach Rs 20 lakh crore by 2030, creating an estimated five crore jobs. However, challenges such as inadequate infrastructure and the high cost of EV adoption remain barriers. Industry insiders are hopeful that the upcoming budget will address these issues with targeted measures.

Building On Past Policies

India’s EV policy framework has been significantly shaped by the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, launched in 2015. While FAME-II, with its Rs 10,000 crore allocation, supported the sector's expansion, the government shifted gears in 2024 with the introduction of the PM-E Drive scheme. This initiative, launched in October 2024, focuses on reducing subsidy dependence as the industry matures.

Experts suggest that the focus in Budget 2025 may shift toward performance-linked incentives for domestic manufacturing, particularly for EV batteries and auto components. Strengthening manufacturing capabilities could help India become a global EV hub.

GST Reforms, Infrastructure Investments

The EV sector has been advocating for tax reforms, including lowering GST on EV batteries to align with rates for other auto parts. Such a move could make EVs more affordable for consumers. Similarly, reducing GST on charging services from the current 18 per cent to 5 per cent has been proposed as a way to enhance affordability and adoption.

Improving charging infrastructure remains another critical demand. Stakeholders have urged the government to classify charging stations as part of the “infrastructure industry,” which would enable easier access to financing and lower costs for setting up networks. Including charge point operators under priority sector lending could also be a game-changer.

Consumer-Centric Incentives

While earlier initiatives have primarily supported manufacturers, there is a growing call for consumer-focused measures.

These could include tax credits, lower interest rates on EV loans, and subsidies to offset the high upfront costs of electric vehicles. Encouraging individual adoption will be key to accelerating the EV transition.

Addressing Manufacturing Gaps

India's EV manufacturing capabilities, especially in battery production, still lag behind global leaders like China. The 2025 Budget could play a pivotal role in bridging this gap by offering incentives for setting up local battery production facilities and fostering collaborations with international firms.

Aligning India's policies with global standards and encouraging foreign investments are also seen as vital steps for positioning the country as a significant player in the global EV market.

As the world shifts towards sustainable mobility, India's EV industry is at a critical juncture. The Union Budget 2025 presents an opportunity to address pressing challenges, bolster infrastructure, and promote domestic manufacturing. By fostering an ecosystem that balances industry and consumer needs, the government could pave the way for India’s leadership in the global EV landscape.