GST 2.0 gives auto, economy a fresh gear; India car market seen at 6.3 million by 2031: Maruti Chairman

GST 2.0 has given a fresh push not just to the automobile industry but to several parts of the Indian economy, helping the country weather the economic uncertainty caused by the West Asia war, Maruti Suzuki India chairman RC Bhargava said on Monday.

Addressing shareholders at the company's annual general meeting, Bhargava said the tax reforms had provided an important buffer for the economy during a difficult period and could also accelerate the recovery of India's small-car market.

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Maruti expects India's passenger vehicle market to grow to 6.1-6.3 million units by 2031, with the small-car segment growing significantly faster than it did over the previous five years, Bhargava said. He attributed the improved outlook partly to the GST rate cuts announced in September last year.

"The Indian economy continues to do well, and collections of GST remain higher than ever before. This is all despite the Iran problems, the West Asia war, and such issues. I do believe that without GST reforms, we may not have done so well in the difficult months that have elapsed," Bhargava said.

Reflecting on his earlier optimism about the impact of the GST changes on the auto industry, Bhargava said the reforms had delivered beyond the sector.

"This happened. I'm happy to inform you that these reforms have given a new impetus not only to the automobile industry but to several sectors of the economy. National GDP growth figures have been better than forecast by most agencies."

Bhargava thanked Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman and other members of the government for what he described as a "historical reform step".

"The reform has shown what a big difference it can make to the economy, and I would urge state governments and the central government to proceed faster on the road to reform, continue to make doing business easier, use more technology, as it has been shown that it reduces corruption and delays."

He also called for greater trust in the private sector and competition, arguing that faster processes and reduced delays could help bring down production costs.

"The faster wealth is created, faster government revenues will grow, and if the government programs continue as they are going, there will be much more equitable growth from the country," he said.

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Bhargava also made a pitch for political consensus on economic reforms, urging "all political parties, leaving nobody out" to recognise the benefits of measures that can accelerate development, improve India's competitiveness and create jobs through greater economic activity.

"Please consider this as a national task, because the strength of India in all global matters will lie in its economic strength," he said.

He added that sustained wealth creation was essential for both economic growth and the expansion of welfare measures.

"It has been witnessed over the years that without creating wealth, we cannot proceed towards either a more prosperous society, an economically stronger India, or extend welfare measures which sustain," Bhargava said.

Small cars back in focus

For Maruti, the improving outlook has prompted a reassessment of its long-term production and sales plans.

Bhargava said the company was "in the process of making an accurate estimate, as possible, of the likely growth of the car market in the next five years, a happy exercise necessitated by the GST reforms".

"This could lead to some changes in our long-term production and sales targets. Today, we are estimating that the car industry will grow to 6.1 million to 6.3 million by 2031, and that the share of the small car market will grow significantly faster than what had happened in the last five years," he said.

The company is expanding capacity to prepare for the anticipated increase in demand.

"Our installed capacity would reach 2.9 million units at the end of 2026-27, and 3.65 million units at the end of 2030-31. We are doing all this expansion because our economy has a huge potential for growth," Bhargava said.

Maruti has commissioned two production lines at its Kharkhoda plant in Haryana, with work underway on a third line.

At its Hansalpur facility in Gujarat, the company has commissioned a fourth line with an annual capacity of 2.5 lakh vehicles, taking the plant's total capacity to 1 million units.

"This is Suzuki's largest plant anywhere in the world," Bhargava said.

Maruti has also begun work at a new site in Sanand, Gujarat, where it plans to install another 1 million units of annual capacity. The proposed investment in the facility is around Rs 35,000 crore.

The expansion comes as India's largest carmaker prepares for what Bhargava believes could be a structurally stronger period for the country's auto market, with GST reform potentially reviving demand for smaller, more affordable cars while broader economic growth supports overall vehicle sales.