Investors expect big bang announcements on GST, GAAR and incentives to boost manufacturing
Mumbai: With less than a week to go for the Union Budget 2015-2016, investors are focused on sectors they think may benefit from budget announcements, while keeping a close eye on the broader blueprint for the economy which may emerge from the government’s pronouncements.
Hopes are running high that the budget will be laced with big bang announcements on issues like the goods and services tax (GST), General Anti-Avoidance Rules (GAAR), and incentives to boost manufacturing.
“It is a good opportunity for the government to gather pace on the reforms front and I don't think it would want to lose out on the opportunity,” said Vaibhav Sanghavi, managing director of Ambit Investment Advisors Pvt. Ltd. “The market expects it to be a game changer, and would want to see concrete steps on infra spending, incentivizing manufacturing and harmony of taxation,” added Sanghavi.
A road map on the implementation of GST is among the most awaited budget announcements, as it would so away with multiple layers of taxation, thereby boosting the ease of doing business in India. The capital markets are also expecting a deferment in the implementation of GAAR by a few years, which could be well received by the foreign investor segment.
“The objective is to ensure that the image of the country to attract investors remains positive, which is why it (GAAR) has not been implemented so far. It is unlikely to be implemented in the near future,” said Dhananjay Sinha, head-research at Emkay Global Financial Services Ltd.
“We need to ensure portfolio flows keep on flowing. Government does not want to create any controversy on what is taxable or not, especially at a time when the economy is on a mend,” Sinha added.
More specifically, markets are betting on increased allocations in railways, roads, power and rural infrastructure. Analysts believe savings generated from lower oil prices will be channelized towards capital expenditure, while maintaining a fiscal deficit in the range of 3.6-3.8% for fiscal 2016. “We expect the government to try and achieve two conflicting objectives: 1) fiscal consolidation (3.6% GFD/GDP ratio for FY16, and 2) growth through higher capital expenditure,” said Kotak Institutional Equities in a 19 February report, adding that lower oil prices will be important in achieving the objective.
Kotak expects a 25% increase in plan expenditure for the year.
According to HSBC economists Pranjul Bhandari, Prithviraj Srinivas and Stuti Saksena, the main theme of this budget will be higher outlays on public investments, particularly railways and roads.
“This would not only address supply-side deficiencies but also crowd-in private investments,” the economists at HSBC Securities and Capital Markets (India) Pvt. Ltd added.
Bank of America-Merrill Lynch also expects an increase in budgetary allocations for roads, irrigation, transportation projects and smart cities.
Mumbai: With less than a week to go for the Union Budget 2015-2016, investors are focused on sectors they think may benefit from budget announcements, while keeping a close eye on the broader blueprint for the economy which may emerge from the government’s pronouncements.
Hopes are running high that the budget will be laced with big bang announcements on issues like the goods and services tax (GST), General Anti-Avoidance Rules (GAAR), and incentives to boost manufacturing.
“It is a good opportunity for the government to gather pace on the reforms front and I don't think it would want to lose out on the opportunity,” said Vaibhav Sanghavi, managing director of Ambit Investment Advisors Pvt. Ltd. “The market expects it to be a game changer, and would want to see concrete steps on infra spending, incentivizing manufacturing and harmony of taxation,” added Sanghavi.
A road map on the implementation of GST is among the most awaited budget announcements, as it would so away with multiple layers of taxation, thereby boosting the ease of doing business in India. The capital markets are also expecting a deferment in the implementation of GAAR by a few years, which could be well received by the foreign investor segment.
“The objective is to ensure that the image of the country to attract investors remains positive, which is why it (GAAR) has not been implemented so far. It is unlikely to be implemented in the near future,” said Dhananjay Sinha, head-research at Emkay Global Financial Services Ltd.
“We need to ensure portfolio flows keep on flowing. Government does not want to create any controversy on what is taxable or not, especially at a time when the economy is on a mend,” Sinha added.
More specifically, markets are betting on increased allocations in railways, roads, power and rural infrastructure. Analysts believe savings generated from lower oil prices will be channelized towards capital expenditure, while maintaining a fiscal deficit in the range of 3.6-3.8% for fiscal 2016. “We expect the government to try and achieve two conflicting objectives: 1) fiscal consolidation (3.6% GFD/GDP ratio for FY16, and 2) growth through higher capital expenditure,” said Kotak Institutional Equities in a 19 February report, adding that lower oil prices will be important in achieving the objective.
Kotak expects a 25% increase in plan expenditure for the year.
According to HSBC economists Pranjul Bhandari, Prithviraj Srinivas and Stuti Saksena, the main theme of this budget will be higher outlays on public investments, particularly railways and roads.
“This would not only address supply-side deficiencies but also crowd-in private investments,” the economists at HSBC Securities and Capital Markets (India) Pvt. Ltd added.
Bank of America-Merrill Lynch also expects an increase in budgetary allocations for roads, irrigation, transportation projects and smart cities.
