Speculations about the upcoming budget indicate how hopeful the investors are after the thumping victory of the NDA. Much expectation lies on the opportunities that can open up for the stock market with the new strategies in the financial budget.
As stated in the NDA manifesto, the main focus of the Modi government lies in boosting the sluggish Indian economy and promoting all-round growth. However, the crippling fiscal deficit in the country continues to be an area of concern. If things go as predicted, the next union budget might just prove to be the next catalyst for the share market.
Some of the vital changes that the market expects from the upcoming budget are-
1. FISCAL CONSOLIDATION– The stock market expects that the prime focus of the budget will be on fiscal consolidation. The government will have to clear stalled and delayed projects and initiate new ones. However the fiscal deficit will prevent the system from going into a complete overhaul. Therefore the implementation has to be a slow, steady and well planned.
2. TAX REPRIEVES– Traders are hoping for tax breaks on stock market investment to attract more investors. The policies of the last government failed to attract much investment in that area.
3. GST– The Modi government is expected to announce its roadmap for the implementation of the Goods and Services Tax (GST). A simpler GST as opposed to a complex tax structure might just be the need of the hour. However passing the GST might pose to be a problem as the approval of the state governments is also required.
- LOWER SUBSIDIES– Job creations and lower subsidies are on the government’s agenda. The upcoming budget aims at greater fiscal discipline without compromising on the availability of funds for growth and development.
- FCRA/CTT– Restructuring of the Forward Contracts Regulation Act (FCRA) might be on the cards. The commodity derivatives market is highly expectant about this move. The CTT (Commodities Transaction Tax) previously levied on highly processed agro products, metals and bullion might also be removed.
- STT– The BJP manifesto promises a non adversarial and conducive tax environment and might remove or lower the STT (Securities Transaction Tax) as a populist measure.STT is levied on the sale and purchase of equities in the capital markets. The Congress government had fixed its collection from STT to Rs 5,992 crore in 2014-15. The removal or reduction of STT is something the marketmen have been clamoring for. Thus, a move by the government could do wonders in bolstering the expectations of the investors.
7. CAD– The Congress government had banned gold imports in a bid to manage the fiscal deficit. The result was a slight improvement of 0.2% of GDP from 0.9% of GDP in the previous quarter. As for the Modi government, the CAD (Current Account Deficit) is expected to rise gradually to 2.6% of GDP in FY15, due to an increase in imports driven by a spike in domestic demand and relaxation in gold imports.