The government is in a “sweet spot” in terms of fiscal situation and has space to roll out stimulus in the Budget for FY18, Madhusudan Kela said.
Stating that demonetisation will change the ‘use of cash culture’, Reliance Capital chief investment strategist Madhusudan Kela on Tuesday said that demonetisation is a big, bold measure by the government and the recovery post demonetisation pain will be gradual in nature. In an interview wth BTVi he said that the government is in a “sweet spot” in terms of fiscal situation and has space to roll out stimulus in the Budget for FY18. A delay in recovery from the demonetisation process coupled with geo-political concerns could hit market sentiment, he warned. After the demonetisation drive, Kela expects equities emerging as an attractive asset as traditional instruments are losing sheen among Indian households. “We have seen higher domestic inflows into markets. Equities have not given returns over the last two years. But markets are poised to give strong returns going forward,” he said.
The Modi government is pitching hard for a cashless economy. Recently, the government decided that no service charge will now be levied for use of debit cards. Department of Economic Affairs Secretary Shaktikanta Das has said that till December 31, 2016, no service charges will be levied on debit cards and that the move is meant to ensure greater penetration of digital transaction. Meanwhile, to encourage digital transactions, the RBI has increased the doubled the limit on the balance that one can keep in e-wallets. The limit has been enhanced from Rs 10,000 to Rs 20,000.
The Narendra Modi government has come under severe criticism from the Opposition for its move to demonetise old Rs 500 and Rs 1000 notes. The reaction on the ground has, however, been mixed. While most people have lauded the move to check black money and corruption, many have said that the implementation, especially when it comes to availability of currency, should have been much better. Struggling to deal with growing anger among the public over cash crunch, the Modi government is issuing new guidelines every few days. These are based on public feedback and are aimed at reducing the problems that common man is facing, following the massive demonetisation drive.
The government has also warned that those who are using other people’s bank accounts to convert their black money will be severely punished. Not only that, those who allow their accounts to be misused for this purpose will also face prosecution.