With conclusion of high stake Gujarat elections and several other major states going to polls in 2018, Corporate India has to factor in political realities weighing on economic decisions of the government, including in the forthcoming Budget, the last full-fledged of the NDA Government, ASSOCHAM has said, after an internal assessment.
"In the run-up to the 2019 Lok Sabha elections, states including Rajasthan, Madhya Pradesh, Chhattisgarh and Karnataka are due for polls in 2018. Inevitably, it would be the popular voters' sentiment that would be factored by the Centre and the state governments in their policies. Any tough reforms, like flexibilities in labour laws may not go well with the popular sentiment and thus, India Inc's expectations on this front should be muted", said the chamber note.
However, an important take away from the current political-economic environment is that the Goods and Services Tax is expected to be further streamlined and rates further rationalised on the lower side.
"The GST had not gone well with the traders, the major political force for the political parties and the issue remained in focus during Gujarat elections. Besides, the Small and Medium Sized Enterprises (SMEs) would also get a boost, starting from the Budget proposals. Their role in creating employment in a shorter span of time is being recognised and the job creation would remain a big concern for the government in the foreground to 2019 general elections," the chamber said.
The ASSOCHAM said, "Going forward to 2018 and 2019, we expect a major attention going to the rural landscape with several initiatives like support to farmers, rural and agri infrastructure. Thus, the Corporate India directly related to the farm economy should stand to gain. The tone would be set in the coming Budget."
The chamber said that the factors to be particularly watched should be inflation, which would now be the top priority of the government in elections years. In the trade off, growth may not get as important a place as inflation and thus, the interest rate scenario looks to be on the upside, rather than downward.
Monsoons in 2018 would also be a crucial variable for the rural demand while the credit growth is still some time away, as banks and companies keep repairing their balance sheets.