A big bang Budget is what Street is expecting from the Finance Minister. At the time, investors will keep an eye on the Fiscal deficit objectives of the government.
The S&P BSE Sensex and the Nifty50 rose by about 9 percent from February 1, 2019, when the government presented its interim Budget under acting Finance Minister Piyush Goyal.
The Budget laid down the foundation of a strong Indian economy by putting emphasis on Infra, housing as well as agriculture.
The expectations are running high this time around as well – largely on two factors. This will be the maiden Budget of the newly appointed Finance Minister Nirmala Sitharaman, and secondly, the Indian economy is showing signs of a slowdown.
A big bang Budget is what the Street is expecting from the Finance Minister. Investors will keep an eye on the Fiscal deficit objectives of the government (3.4 percent of GDP), change in market borrowing plans, and any revisions in tax revenues.
“The larger picture today is that the government needs to revive growth, generate tax revenues, provide consumption subsidy to rural farmers, reduce tax rates for taxpayers and businesses, and incentivise investors to promote investment in capital markets and real estate,” Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management told Moneycontrol.
“Given the lower than expected GST collections, the government also needs to identify causes for the shortfall in revenue collections. This may entail a restructuring of the GST structure. Some of these objectives are clearly at odds with each other; for instance, growth in tax revenues and tax cuts, fiscal discipline, and growth in revenues, etc.,” he said.
Here are the views of various experts regarding the market expectations from the new government’s full Budget for 2019:
Reduction in STT or restoration of rebate:
Securities Transaction Tax has been high for a long time and the investors are waiting for this to be brought down. Lowering of the STT will be very positive for the domestic stock markets.
“The biggest demand remains a reduction in STT or restoration of rebate on securities transaction tax (STT) under Section 88E which was withdrawn by FM Chidambaram in 2008,” Nikhil Kamath, Co-founder and Chief Investment Officer, Zerodha told Moneycontrol.
“STT continues to hinder market efficiencies by adding a burgeoning cost on price discovery and making the markets inefficient. We lose considerable business as a country from people trying to circumvent STT moving to different regions for execution,” he said.
Financial Sector reforms:
The banking sector is going through a liquidity crisis especially in case of PSU and NBFC stocks. To provide the much-needed impetus to ailing public sector banks with a road map of capitalisation, consolidation and better governance.
“The government could also provide clarity over the future role of the Bank Boards Bureau in improving the public banks’ health. Higher allowance of Indian debt to foreign investors may help bridge the gap between demand and supply,” Rajesh Cheruvu (CIO) of WGC Wealth told Moneycontrol.
“Clarity on the regulatory oversight for Non-banking and Housing Finance Companies, in the form of capital requirements, asset liability rules and refinancing provisions. The capitalisation of NHB and SIDBI could also be on the table to meet current refinancing needs of housing and SME sectors,” he said.
DBT, Waivers, and Increase in short term loans up to Rs 1 Lakh:
The distress in rural demand and ongoing agrarian crisis is taking a toll on a sector that is directly or indirectly giving 50 percent employment to the economy. Hence a real impact is to be made here.
“The DBT, Waivers, and Increase in short term loans up to Rs 1 Lac without interest for five years are some of the promises government made. Hence a more detailed view and its implementation are important. In fact, it is critically important,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.
Plug GST leakages and increase collection:
GST leakages should be sought out. Since there cannot be much change in tax slab, only if industry demands, experts believe this would improve the GST collection numbers. A high GST collection would also lift some pressure on the fiscal deficit front.
“Rules and Laws should now encompass a broader base to increase the GST numbers so that the government is able to improve its spending as it’s now needed to revive the economy. Improved spending from the government would entail private sector to get some boost,” said Nadeem.
Divestment:
The government may also focus on divestment for some of its entities such as BEML, Air India, etc. “It may announce more CPSE ETFs launch in the near future for this purpose,” said Gupta of Trading Bells.
“Disinvestments of PSUs through listings and ETFS, strategic sale of defunct PSUs and residual holdings of earlier strategic sales, sale of surplus land of PSUs to help maximise non-tax revenues to meet government’s ongoing development and welfare spend,” Cheruvu of WGC Wealth said.
Road map to Direct Tax Code:
This should put to rest all the mismatches and anomalies in direct taxes, simplify tax treatment, reduce the scope for litigation and improve predictability. “This should help improve the tax to GDP ratio through compliance and cover all the necessary spectrums of taxation including Wealth tax,” said Cheruvu of WGC Wealth.
