The economic data is for us to see but the good thing is that finally after a long time, it looks like the government is wanting to do something about it said Mihir Vora, director and chief investment officer, Max Life Insurance.
Corporate tax cut was a very courageous event and the fact that they could do it even in a situation when there was a slowdown means that the government is aware of the market, he said in an interview with CNBC-TV18. However, the risk is that they should not be governed too much by the market and not forget the structural reforms that we all want whether it is in the form of investments in infrastructure, ease of doing business – those are the long-term structural things, which will have to be done in parallel along with these short-term measures like tax cuts.
"The long-term solutions still need to be taken care of which will happen now that we are close to the second year of the government’s term,” he added.
With the risk of fresh telecom NPAs emerging, when asked if the market is in for one more round of crisis he said,“You cannot have a situation where large corporates are going to the government but on the other hand, there also comes a point in time where there may be no choice but for the government to intervene. Even in the peak of the financial crisis in 2008, the bastion of capitalism, which is the USA forced the large banks to take capital from the government, it was a government bailout. So there will come a time when the government will have to take actions whether it is in the telecom sector or in the banking sector and you cannot ignore the fact that once you have a big shock, which devastates the large part of the system, it becomes much difficult to come out. It may take years. So at some point in time the government should and can come in depending on the situation,” said Vora.
With regards to consumption, he said if the government is thinking of hiking goods and services tax (GST) rates, that is a negative for consumption. "I sincerely hope, they focus more on the compliance part of it rather than hiking taxes because already the telecom rate hikes are Rs 40,000-50,000 crore out from the pockets of the consumer. So, consumers are already on an annualized basis paying Rs 40,000-50,000 crore just on the telecom sector and it being a mass based product, it will take away from some other consumption pocket. On top of it if we have GST hikes, that not only will take wallet share away but it will also lead to inflation,” he further mentioned.