With the recent demonetisation, the pre-budget expectations will naturally vary across different sectors. The sudden decline in money supply has adversely impacted consumption demand in the economy. However, we should look at the bigger picture of demonetisation, which will definitely fetch results in the long term that will hopefully lead India to a brighter, more stable future.
In 2016, the steps taken by the government in the direction of policy announcements made over the course of past two years are in sync with the overarching objective of assuring a conducive environment for businesses. The amendments made in the policy framework governing investments are meant to liberalise and simplify FDI to provide ease of doing business in the country, leading to larger FDI inflows that will contribute to growth of investment, incomes and increased employment in the country. This will inturn help facilitate the entry of multiple International brands in the country, leading to competitive pricing, eventually benefiting consumers.
The introduction of Goods and Services Tax (GST) in the Constitution Bill is expected to be one of the biggest reforms and could add 2 percentage points to India’s GDP growth in the medium term. This initiative will create a uni-tax structure, making business more convenient by replacing all indirect taxes levied on goods and services, which will reduce the cascading effect of tax on the cost of goods & services.
Next year’s budget is also expected to promote cashless transactions by offering discounts when using cards at toll booths, waiver of merchant discount rates, when using debit cards at POS terminal etc. that have already been implemented, though for a limited time. Additional benefits to those opting for cashless transactions through credit cards, debit cards, mobile wallets will lead to positive buyer sentiments, thereby stimulating consumer spending.
To bring back order & smooth inter-functioning of various key sectors, macro-economic changes and incentives are urgently required. There are expectations that the government would take steps to increase disposable income and improve the overall economy by rationalising personal income tax rates. Higher income tax exemption and deduction would be the key to the growth of the luxury segment.
This article has been authored by Dinaz Madhukar-Sr. Vice President, DLF Luxury Retail & Hospitality.