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6 things to expect in Samvat 2074
Every Diwali is the start of a new Samvat year. The year gone by—Samvat 2073—was quite eventful. After all, Indians witnessed two historic events: demonetization and the rollout of the Goods and Services Tax (GST).
As with any big ticket change, there was a lot of disruption and confusion initially, especially over GST. Now, however, things are getting clearer. Naturally, the markets too felt the impact of these decisions.
So let’s see what you can expect in Samvat 2074:
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GST benefits and changes
The Indian government is simplifying GST rules. These are mainly to the benefit of small and medium-sized enterprises (SMEs) and exporters. Some of these changes will be implemented in Samvat 2074. Starting October 2017, companies earning less than Rs 1.5 crore can file their tax return every quarter instead of every month, as per media reports. This is expected to help save on compliance and administrative costs. The government also reduced GST rates on 27 produces, including the tax on man-made fibre and yarn to 12% from 18% earlier. This is expected to benefit both the consumers and the industry, according to a Kotak Securities report. You can also look forward to the decision on the ‘reverse charge mechanism’. The rule was put on hold until April 2018, as per media reports. The mechanism ensured that businesses paid GST on any purchase of over Rs 5,000 from an unregistered business. This led to big enterprises distancing themselves from unregistered businesses..
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Government revenue
Digitization and demonetization helped the government to bring more people within the tax net. The rise in the number of income tax return (ITR) filings is an indication. Until 5 August, 2017, 2.82 crore ITRs were filed—a jump of 25% from the same period in FY16-17, as per a Business Today report. Even direct tax collections rose 17.5% in April-August 2017 from the previous year, LiveMint reported. This helped the government meet target GST collections in the first two months, finance minister Arun Jaitley said. In fact, he expects the GST revenue to surge in the coming months, as per media reports.
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India Inc earnings
Demonetisation and GST affected consumer demand and sales. And this disruption is likely to continue in preventing any recovery in consumption. Experts have cut FY18 earnings for most sectors by 10-30% since demonetization. Moreover, oil prices have been rising. This increase in crude prices could affect the earnings of FMCG, paints, and tyre companies. Of course, upstream oil companies are expected to see earnings rise by 15-17% in FY19, as per an Economic Times report. But the good thing is that India continues to remain the only market with higher earnings than the long-term average. In fact, many experts have increased their earnings forecast of every 1 in 10 stocks on the BSE 500, the ET report said.
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Interest rate
The RBI expects inflation to rise to 4.2-4.6% in the second half of FY18. It earlier expected inflation to fall in the range of 4% to 4.5%. This rise in prices is because of GST implementation, farm loan waivers, and the implementation of the 7th Pay Commission. Moreover, the rupee is facing a downside pressure. So, it’s worth keeping an eye on the RBI’s credit policy reviews for any changes in interest rates. While experts believe that interest rates could remain unchanged in the current fiscal, the RBI is likely to follow a ‘wait and watch’ policy.
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Petroleum products under GST
The government—both State as well the Centre—earns a significant portion of their revenue by imposing taxes on diesel and petrol. Currently, petroleum products have been kept out of the GST net. However, the central government wants to bring petroleum products under GST too. It means to take up discussions with different state governments to reach a common agreement. This could be a decision worth noticing. It has the potential to reduce fuel prices and benefit the consumers, as per a Hindu Business Line report.
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Election
Political events affect the markets too. In the next Samvat, we can expect state elections in Gujarat and Himachal Pradesh. Any wins by the BJP-led National Democratic Alliance (NDA) government could increase its majority in the Rajya Sabha. This could then help the government pass on more reforms process in the future, according to credit ratings agency, Moody’s.
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3.6%
The world economy seems more optimistic too! The International Monetary Fund (IMF) recently improved its forecast for the world economy. It expects the global economy to grow slightly faster by 3.6% in 2017 and 3.7% in 2018. "The global upswing in economic activity is strengthening," the IMF said. This is because of faster growth in regions like—Japan, Europe and Russia. Of course, the international agency lowered its expectations for the United States and the United Kingdom.
