The Indian government has proposed a cut in the excise duty on small cars from 24% to 16%, according to Reuters. The cut would take effect in the budget for the year to March 2007.
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The move is designed to promote India as a manufacturing hub for small cars. Small cars are defined as cars up to 4000mm in length, with engine capacities of up to 1.2 litres for gasoline cars and 1.5 litres for diesel.
Shares in local vehicle producers Maruti and Tata have risen as a result of the news and Hyundai and Maruti have already announced price cuts.
Small cars currently account for around three quarters of all cars sold in India.
