Thursday, 29 December 2016

Govt may benefit up to Rs 100K cr, must consider tax cuts

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From April next year growth should bounce back. Demonetisation hasn’t changed the structural demand-supply balance, but it has only got dislocated.” FIIs selling are a function of EM allocations. US interest rates going up, dollar strengthening are some of the headwinds for EMs. Markets have absorbed the events of 2016. People are still looking for opportunities, adding that for investors there aren’t that many places to go. India’s GDP has been doubling every six years in rupee terms which is leading to growth in consumption and investments. In the medium- to long-term a lot of investors are positive and they are in a wait-and-watch mode. 

Whatever disruption MFIs and SMEs have faced, they have enough fall-back reserves, Shah said, referring to how very few people live from hand to month. We think remonetisation is now crucial; the banking sector has gone through a huge amount of NPAs. This entire stress due to demonetisation maynot be more than Rs 40-50,000 crore for banks. The new year might be a good place to kick off tax rationalisation, adding that he expects the government to spend on social programme. The government should benefit to the tune of Rs 100,000 crore from the demonetisation impact by way of additional taxes or in the form of currency won’t come back to RBI. This will give elbow room for government to cut taxes.

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