Ify winners in new era

The GST implementation is expected to benefit the automobile industry. The cost for inter-state transfer will come down as it will surpass the various octroi and check points. This will also positively impact the logistics cost and drive demand. Most of the paint and cement makers will save on their supply chain and carrying costs. The overall taxation will be also lower, which could lead to volume increase and margin expansion.

Due to higher compliance among corporates, Rajah expects government deficits to reduce, positively impacting interest rates.

Dr Sean Chang, head of Asian debt investment at Baring Asset Management (Hong Kong), expects support to the domestic currency among other benefits. “Single regime indirect taxation system in India could benefit domestic trade and economic activities. India tax processes should be more straight forward and that should improve from the cumbersome tax policy mechanism of the past. We expect the future effects are positive in those fostering economic activities,” Chang said.

“That should also indirectly supportive to the domestic currency in general assuming other factors constant,” Chang added.

Currently, the Indian rupee reversed its record weakness and has been on a strong footing compared to the US dollar.

Inflation

Fund managers have their own doubt on the impact on inflation.

“It is very difficult to point out the impact of GST on inflation. The second is pricing power of the industry itself. Earlier the industry margins were contracting. The final finished product prices they didn’t have pricing power due to low capacity utilisation. But as capacity utilisation increases, pricing power would improve,” Rajah said.