Over the years, while the Indirect tax policies across industries & products have been progressively refined leaving little room for mass changes on that front, we expect continued focus on inclusive growth and believe allocations will be aptly made for spending on Infrastructure Building and Rural / Social sector schemes, especially on education & health.
While the Government scored high marks last year by way of huge cash generation through 3G Auctions & PSU Divestment, there are many other pending issues on the structural reforms front, despite of high expectations during the last years’ Budget. We believe there will be some clarifications / implementation road map given, especially with respect to:
• Tax Reforms (like GST implementation, Direct Tax Code, Simplification of Tax Laws)
• De-regulation & Subsidies (Oil & Gas, Fertilizers, Food, etc),
• Relaxing FDI norms (in sectors like BFSI, Media, Retail, etc).
A gradual & phase-wise withdrawal of Fiscal Stimulus to continue to ensure high GDP growth even as a part of the stimulus is rolled back.
With the Inflation stubbornly running high & the consequently elevated high Interest Rates, the FM’s challenges have multiplied many folds and it will be very tough to manage the Balance between the distinct objectives of maintaining high GDP growth but systematically reducing the fiscal deficit as well as controlling inflation. Hence we expect compromises on the fiscal deficit front and do not expect it to come down meaningfully in the near term. We expect FY12 Fiscal Deficit Target to remain elevated at 5% or higher.
While the Government enjoys the advantages of a democratic set-up, it will also have to act responsibly and focus urgently on Tax & Judicial compliance and Governance reforms to fight the corruption which seems to have engulfed our entire political & administrative structure. Overall, we believe the Government has yet another opportunity to make a difference and put the already thriving economy on to a definitive long term high growth path.
While the expectations are low, we still hope for some positive surprises!
Sectoral Expectations:
AUTOMOBILES:
Expectations- No Change in Excise duty rates except the Excise duty on vehicles increase selected diesel vehicles, which may increase.
Impact- The input costs for most Automotive companies have selected diesel vehicles, which may increase. been rising forcing them to increase their prices frequently. This has started hurting volumes and growth seems to have been slowing. Thus we do not expect the Government to roll back the excise duty cut on vehicles. Owing to subsidized Diesel rates and high under recoveries, Government may increase excise on selected diesel vehicles. This may impact the volumes of Diesel vehicles negatively. For the latest updates PRESS CTR + D or visit Stock Market news Today
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