NEW DELHI: While pausing the rate cut cycle earlier this month, Reserve Bank of India (RBI) Governor Shaktikanta Das said the monetary policy committee was awaiting greater clarity over the counter-cyclical measures that the government could announce in the Union Budget this February.
Analysts said the market is waiting for demand-side, and not supply-side, boosters from Finance Minister Nirmala Sitharaman, and any easing of the personal tax structure or steps that give more cash in the hands of the consumer will be cheered by the market.
The market will also welcome any tinkering with the long-term capital gains tax or dividend distribution tax.
About a dozen brokerages and fund managers, who participated in the year end survey of ETMarkets.com, said execution holds the key. Analysts feel the effect of the recent government initiatives, including the corporate tax cuts, would take two to three quarters to reflect in the economy.
“What ails the government currently is not dearth of out-of-the-box thinking, but within-the-box execution,” said Vikaas Sachdeva, CEO at Emkay Investment managers.
Noting that the government has announced quite a few measures to boost the economy at regular intervals, Sachdeva said execution measures need to be intensified to ensure that the benefits reach the taxpayers, both in spirit and kind.
Sampath Reddy, Chief Investment Officer at Bajaj Allianz Life Insurance, said there are expectations of some relief on the personal tax front, even though there seems to be limited fiscal space for a very large relief.
Any cut in the LTCG would partially address the demand side of the problem, said Srinivas Rao Ravuri, CIO for Equity, PGIM India Mutual Fund.
Vinay Pandit, Head of Institutional Equities at IndiaNivesh, said LTCG can be removed since it has hardly yielded anything to the government post introduction and the security transaction tax (STT) can be increased instead.
He expects measures that can ensure that the reduced interest rates are passed through fully. “While interest rates on fixed deposit have fallen, home loans, car loans and personal loans continue to be pricey,” he noted.
There could also be lowering of income-tax surcharge on the super-rich tax, said Pradeep Gupta, Vice Chairman & Co-Founder of Anand Rathi Group. “In addition, I expect an increase in government spending on infrastructure and inducement to the corporate sector to invest and kickstart the growth cycle.”
Insurance, real estate and auto sectors may get some sops, said Manav Chopra, CMT, Head of Research – Equity, Indiabulls Ventures.
“Supply-side fundamentals on the liquidity, financing and industrial and operating side are better today than they were in last one year. To that extent, the market would not view any new supply-side measure as something to cheer about. A lot can be done to revive demand, especially in the real estate space,” said Suhas Harinarayanan, Head of Institutional Equity Research at JM Financial Institutional Securities.
Reddy of Bajaj Allianz Life Insurance said some other measures can also materialise outside the Budget like a privatisation push through strategic divestment to ease fiscal slippage and some GST-related sops.
Source: Economic Times