The Impact of Car Prices on the Indian Economy and Possible Solutions

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Have you ever wondered why your favorite car, Fortuner, is so expensive in India, priced at a staggering 49 lakh rupees? This high price tag has raised several questions and concerns among the Indian population, which consists of approximately 141.3 crore people. Many blame both the government and Toyota, the top automaker company in India, for this issue, which has caused a lot of difficulties for consumers. However, instead of pointing fingers, it is essential to find solutions to address this problem and ensure a more affordable and accessible automotive market for the people of India.

Factors Affecting Car Prices

Car prices in India are influenced by various factors. Understanding these factors can help consumers make informed decisions when purchasing a car. Here are some key factors that affect car prices:

Population size and demand for cars

The size of the population and the demand for cars play a significant role in determining car prices. With a population of approximately 1.4 billion people, India has a high demand for cars, which can drive prices up.

Taxes and government regulations

Taxes and government regulations have a direct impact on car prices. For example, the Goods and Services Tax (GST) in India is currently set at 28% for cars, which adds to the overall cost.

Manufacturer’s base price and additional charges

The manufacturer’s base price and additional charges also contribute to the final price of a car. The base price set by the manufacturer includes the cost of production and profit margin. Additional charges, such as taxes, registration fees, and insurance, further increase the overall price.

By considering these factors, consumers can better understand why car prices vary and make informed decisions when purchasing a car.

Calculating the On-Road Price

When purchasing a car like the Fortuner, it’s essential to consider the on-road price, which includes various components. Here’s a breakdown of the on-road price for the Fortuner:

  • Subsequent Base Price: The base price set by the manufacturer is 41 lakh rupees and 22,000.
  • GST and Base Price: The Goods and Services Tax (GST) is currently set at 28% for cars, which adds approximately 11 lakh rupees and 54,000 to the base price.
  • Registration Charges: The registration charges vary, but on average, they are around 5 lakh rupees and 25,000.
  • Taxes Collected at Source (TCS): The government collects 1% TCS on the ex-showroom price, which amounts to around 41,220 rupees.
  • Insurance, Fast Tag, and Accessories: Additional charges for insurance, fast tag, and any accessories can further increase the on-road price.

By considering all these components, the on-road price for the Fortuner can reach approximately 49 lakh rupees, including a 53% increase from the base price.

It’s important to note that these figures are based on the current tax rates and charges and may vary. However, understanding these factors can help buyers budget effectively and make informed decisions when purchasing a car.

Comparison with Other Cars

When comparing the Fortuner with the Tata Nexon, several factors come into play, including car dimensions and GST rates.

The Fortuner is a larger SUV with a length of 4 meters and a 1500 cc engine size, while the Tata Nexon has a smaller length of 3.7 meters and a 1200 cc engine size. These differences in dimensions and engine size can impact the price of the cars.

Additionally, the Fortuner falls under the 22% cess category, resulting in a price increase of 53% from the base price. On the other hand, the Tata Nexon falls under the 3% cess category, resulting in a price increase of 38% from the base price.

It’s important to consider these factors when comparing the prices of different cars, as they can have a significant impact on the final price.

Pocket-Friendly Car Options

If you’re looking for more affordable car options, there are a few models to consider. Analyzing the onward price and showroom price can help you make a wise decision.

When comparing car prices, it’s important to understand the factors that affect the real price. Factors such as registration charges and taxes collected at source (TCS) can significantly impact the final cost.

For example, the Tata Nexon is a pocket-friendly car with an onward price of 16 lakh 74,000. The base price set by the manufacturer is 9 lakh 83,000. With the addition of GST and other charges, the on-road price reaches approximately 16 lakh 74,000. This shows a 38% increase from the base price.

Considering these pocket-friendly car options can help you find a more budget-friendly solution. By including registration charges and TCS, you can accurately evaluate the real price of the car before making a purchase decision.

Government Earnings and Road Development

Road tax and road development are closely related. The government earns a significant amount of revenue through road taxes, which are collected from vehicle owners. These earnings play a crucial role in financing the development and maintenance of roads and highways across the country.

The importance of government earnings from roads cannot be overstated. It is these funds that enable the government to invest in infrastructure projects, construct new roads, repair existing ones, and improve road conditions for the benefit of the public.

However, despite the government’s earnings, there are still issues with the current road conditions in India. Many roads suffer from potholes, lack proper signage, and are poorly maintained. These issues can lead to accidents, traffic congestion, and increased travel times for commuters.

To address these issues and improve road infrastructure, several possible solutions can be considered:

  • Increased investment in road development projects to ensure proper maintenance and repair of existing roads.
  • Implementation of stricter quality control measures during road construction to ensure durability and longevity.
  • Promotion of sustainable and eco-friendly road construction techniques to minimize environmental impact.
  • Regular inspection and maintenance of roads to identify and address potential issues before they become major problems.
  • Effective enforcement of traffic rules and regulations to improve road safety.

By implementing these solutions, the government can work towards enhancing road infrastructure and providing safer and smoother travel experiences for all citizens.

Scrappage Policy and Electric Vehicles

The Indian government has introduced a scrappage policy to address the issue of old vehicles on the road. This policy encourages people to scrap their old vehicles, especially those that are 15 to 20 years old. Scrapping these vehicles, not only helps in reducing pollution but also contributes to creating a more sustainable environment.

There are several benefits of scrapping old vehicles. Firstly, it helps in reducing air pollution by removing vehicles that emit harmful gases. Secondly, it promotes the use of newer and more fuel-efficient vehicles, which are better for the environment. Additionally, scrapping old vehicles can also help in reducing traffic congestion and improving overall road safety.

As part of the push towards a greener future, the government is also promoting the use of electric vehicles (EVs). Electric vehicles have several advantages over traditional petrol or diesel vehicles. They produce zero tailpipe emissions, which helps in reducing air pollution. They also have lower running costs and require less maintenance compared to conventional vehicles.

To encourage the adoption of electric vehicles, the government offers various incentives. These incentives include lower GST rates, which are currently set at 5% for electric vehicles. Additionally, several states also provide subsidies and tax benefits for EV owners. These incentives aim to make electric vehicles more affordable and accessible to the general public.

Contribution of Automobile Companies

Automobile companies play a vital role in the Indian economy, contributing significantly to its growth and development. Two major players in the Indian automobile industry are Maruti Suzuki and Toyota. These companies have made substantial contributions to the country’s economy through their revenue.

Maruti Suzuki, a subsidiary of Suzuki, has been a leading automobile manufacturer in India for many years. In the fiscal year 2020-2021, Maruti Suzuki reported a revenue of 3,820 crores rupees. This substantial revenue indicates the company’s strong market presence and customer base.

Toyota, another prominent automobile company in India, has also made significant revenue contributions. In the same fiscal year, Toyota reported a revenue of 3,400 crores rupees. This highlights the company’s success in the Indian market and its ability to attract customers.

However, the automobile industry faced numerous challenges during the COVID-19 pandemic. The lockdown restrictions and supply chain disruptions had a severe impact on production and sales. Despite these challenges, automobile companies implemented strategies for stable growth and business development.

To ensure stable growth, companies focused on streamlining their operations, optimizing costs, and adapting to changing market demands. They also invested in research and development to introduce innovative and sustainable vehicle models. Additionally, companies strengthened their online presence and digital marketing strategies to reach a wider customer base.

By implementing these strategies, automobile companies aimed to overcome the challenges posed by the pandemic and ensure a stable future for the industry. Their contributions to the Indian economy and efforts towards growth and development are essential for driving the country’s progress.


In conclusion, the high prices of cars in India are influenced by various factors such as population size, taxes, government regulations, and additional charges. Understanding these factors can help consumers make informed decisions when purchasing a car. It is important to consider the on-road price, which includes components such as base price, GST, registration charges, TCS, and additional charges. Comparing different car options and considering pocket-friendly models like the Tata Nexon can also help in finding more affordable alternatives.

To address the issue of high car prices and improve road infrastructure, possible solutions include increased investment in road development projects, stricter quality control measures during construction, promotion of sustainable road construction techniques, regular inspection and maintenance of roads, and effective enforcement of traffic rules and regulations.

We invite viewers to share their thoughts and experiences regarding car prices and possible solutions in the comments section. Additionally, for more information and resources on car prices and road infrastructure, please refer to the sources provided in the video description.

Thank you for tuning in and we look forward to your valuable contributions. Stay safe and have a great day!


What factors contribute to the high price of cars in India?

The high price of cars in India is influenced by factors such as population size, taxes, government regulations, and additional charges.

How is the on-road price calculated?

The on-road price is calculated by considering the base price set by the manufacturer, GST, registration charges, taxes collected at source (TCS), and additional charges such as insurance, fast tag, and accessories.


What are some affordable car options?

Some affordable car options in India include the Tata Nexon, which offers a pocket-friendly price compared to cars like the Fortuner.

What is the government doing to improve road infrastructure?

The government is investing in road development projects, implementing stricter quality control measures, promoting sustainable road construction techniques, and enforcing traffic rules and regulations to improve road infrastructure.

What is the scrappage policy and how does it impact the industry?

The scrappage policy encourages people to scrap their old vehicles, reducing pollution and promoting the use of newer, fuel-efficient vehicles. It has a positive impact on the automotive industry by reducing air pollution, and congestion, and improving road safety.

What incentives are provided for electric vehicles?

The government provides incentives such as lower GST rates (5%) and subsidies for electric vehicles to make them more affordable and accessible to the general public.

How do automobile companies contribute to the economy?

Automobile companies contribute to the Indian economy through their revenue, job creation, and growth in the automotive sector. Companies like Maruti Suzuki and Toyota have made significant contributions to the country’s economy.

What strategies can be implemented for stable growth?

Automobile companies can implement strategies such as streamlining operations, optimizing costs, investing in research and development, strengthening online presence, and adapting to changing market demands for stable growth.

Where can viewers find more information and resources?

For more information and resources on car prices and road infrastructure, viewers can refer to the sources provided in the video description.


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