The GST collections can stage a meaningful jump, part of this will be visible this year and the full impact will be visible next year, says Mahesh Nandurkar, India Strategist, CLSA. Excerpts from interview with ETNOW.
The GST tax collection figures have been low. What do you think the budget will do and what exactly are the projections for next years direct tax collections?
Yes, true. In the interim budget, the revenue numbers were clearly on a more optimistic side. We definitely hope that in this budget, the numbers become more realistic. I definitely believe that the GST collections will start to improve, especially as the government has also announced the measures around the invoice matching and there is a time table which has now been brought out. My view is that the GST collections can stage a meaningful jump, part of this will be visible this year and the full impact will be visible next year. Between FY20 and FY21, I would be expecting an 18-20% increase in the GST collections on a year-on-year basis in each of those two years.
I am quite optimistic that with the invoice matching mechanism and the other tightening measures, the tax collections will improve and it will have some positive rub-off effect on the direct tax collections as well.
Given the slowdown in the economy, would certain sectors get the required push needed to boost growth like perhaps auto or housing?
Yes, certain initiatives from the government should help in getting over this current phase of slowdown. We feel this slowdown is not really a temporary one and it is essentially the lagged impact of the weak investment cycle and the weak housing market specifically.
My expectation therefore will be that something will get announced on the housing front. The good news is that while India does not really have any countrywide or national data on the housing front and therefore there is a lot of confusion in the market, but our analysis of some of the broad-based indicators like cement demand, housing affordability and also stamp duty collections of various state governments last year point towards the fact that the housing market recovery has already started.
I would say it is in a very initial phase and maybe in another six to 12 months time we would probably be looking at a much broad-based recovery. But from the government side, they have been clearly doing the right things by pushing things like affordable housing.
That is a very ambitious programme of the prime minister and going in the right direction. But apart from that, the broader housing market also needs to revive for the economic sentiments to revive.
Can the Budget do something to solve the NBFC problem?
RBI has already acknowledged the problems in that space in the recent financial stability statement, but interestingly they have mentioned that it is has helped discipline the sector. The general stance of the government has been that it is not a systemic issue and I would completely agree that it does not look like a systemic issue at this point in time.
The broader credit growth takes into account not just NBFCs but banks and the bond issuances and the commercial paper etc. We can see the credit flow into the broader economy has not really slowed down over the last six to nine months or so. Certain segments of the economy have definitely got negatively impacted, certain NBFCs have got impacted, possibly certain SMEs and small businesses and even real estate developers have got impacted but at a broader macro level, the credit flow into the system, into the real estate space also has not really come to a standstill as it has been made out to be.
So, it is not a systemic issue. There are specific issues with certain entities and we need to watch this space carefully that the problems with those certain entities do not spill over into a broader crisis. My base case at this point in time is that the problem remains contained within that limited space and that is obviously contingeRead More – Source