The rupee is expected to rise further in coming days as new GST measures are expected to help lift growth in the economy, with investors likely to rush to buy more Indian stocks in anticipation of an impact on the rupee’s valuation.
The rupees rise against the US dollar after US President Donald Trump signed a new $1.5 trillion tax cut into law on Monday.
India’s stocks rose on Monday, after the government announced a new tax cut for the country’s manufacturing sector on Tuesday.
Analysts expect the tax bill to boost the countrys manufacturing sector, with the government hoping to spur an investment boom as it looks to boost exports and boost growth in its economy.
A separate tax bill has been in the works since June that is expected soon to be signed into law, with analysts expecting the bill to bring in billions of dollars in new investment and boost domestic manufacturing output.
The tax bill is expected as a major part of India’s agenda for the coming budget, which is expected next month.
The countrys GDP growth will also rise, with Prime Minister Narendra Modi, who will take over as the country s next chief minister next month, predicting that the economy would grow by 2.7% in the first quarter, up from 1.6% in 2017.
“The government will aim to bring the economy to 3.0% by 2020 and to 5.0%, by 2030.
We are hoping for a 3.5% growth rate for this year,” said Abhishek Kumar, head of global equity research at ING.
India’s new tax reforms also have been met with resistance from many companies.
Some companies that had been expecting a boost from the GST, including banks and insurers, said they will be waiting for a more detailed report on the tax reforms before deciding on the timing of their investments in the country.
“We will wait for the details, but it seems that the tax reform will come in late January,” said Senthil Suresh, managing director at Mumbai-based equity fund Suresha Capital, which has a portfolio of Indian companies.
“For our investments, we are waiting for the tax cuts and the tax changes.”
Meanwhile, a new government-backed private equity fund has emerged to help companies set up their new manufacturing plants in India, as the new measures take effect.
Investors are expected by the government to invest heavily in manufacturing.
In a statement, the Bharatiya Janata Party government said it will set up private equity funds in a bid to spur investment in the Indian economy and boost the nations GDP.
“This is a way for private investors to gain access to government-approved assets, which could be used for infrastructure projects and other public sector undertakings.
We have made it clear that the private sector should be encouraged to take up government-endorsed projects in order to get investment in manufacturing,” the statement said.
It also said the government would ensure the availability of finance for private investment in sectors like education, health and other areas that will be affected by the GST.
Indian Prime Minister Modi, left, listens to members of the National Stock Exchange as he announces the creation of a new stock exchange for India, during a visit to a bank in New Delhi, India, May 25, 2021.
India’s Finance Minister Arun Jaitley, right, and other government officials, listen to members from the National stock Exchange as they announce the creation for a new Stock Exchange for India at a New Delhi bank, May 26, 2021.(Reuters photo: R. Narayanan)Indian shares rose on Tuesday on hopes the tax measures would boost the Indian manufacturing sector and the rupees value against the dollar.
The rupee was last trading at 74.39 to the dollar on Tuesday, up 1.9% from Tuesday’s close.
The dollar index was last at 66.36.
The government’s decision to set up a new fund to invest in the manufacturing sector has already raised questions about its impact on growth in India.
Analysts have raised questions over the sustainability of the new fund.
One of the main concerns is that it could create a short-term bubble, said Vasant Bhatia, senior market strategist at brokerage CB Insights.
“I am not sure if it is a bubble or not,” he said.
India, a key global economy, is expected by many analysts to see a modest rebound in growth this year, after several years of slow growth.