The Market Unfolds Under the GST Mojo

GST has been storming the nation and the market with questions whether the move would turn out to be a game changer or a mere flash in the pan. The answers might be discovered as this article evolves, and if not, wait and watch is always the best way out. The Bill is on the final lap in its race to a unanimous approval by the House and is expected to emerge a winner during this Parliament session.

The romance of the GST and the Market:

Indian Markets have been watching closely, every move of the coveted GST bill even as statistics suggest that the implementation of the bill will boost the business environment of the country. Streamlining the Tax Structure by implementing the GST Bill would invariably offer the much-needed reform fillip the NDA led government was looking for. The failure to pass GST would adversely impact the growth prospects of the Indian markets as the bill holds the key to a steady rise in the inflation guidance of the Indian Economy. The implementation of the bill is also expected to add momentum to Prime Minister Narendra Modi’s “Make in India Project” which promises to propel the subcontinent as the growth engine of the Global business fraternity.

While some reports claim that GST is a silver bullet, there are others who believe that the bill needs to be designed with the target of India’s long-term growth in the next two decades or so. The actual effect of GST bill will take the time to reflect itself. After the bill is implemented, the bill will boost earnings in the logistics, transportation, and manufacturing sectors.

What’s in for the State?

The GST bill merges the service tax levied by the center and the VAT levied by the state into a single tax model. Statics suggest that the implementation of the GST bill would result in 2% GDP growth of the Indian Economy. In the event of states losing out in their earnings pie due to the implementation of the GST bill, the center has promised to compensate the states for their respective losses for the next five years. One of the primary goals of GST is to eradicate the unwanted implementation of double taxation. This, in the long run, would boost the business sentiment of the country by ensuring that consumers are rewarded with value for their money. GST will ensure that the center would share a part of the revenues generated from corporate income tax and customs duties with the states.

Economy under the wings of GST:

GST is seen to be benefiting the economy in more than one ways over a period. The bill is capable of covering all the loopholes in the present tax structure. This will, in turn, trim down the inefficiencies of the trades in India, increasing the productivity of the economy. It will also increase the efficiency by simplifying the supply chain and reducing the logistics cost and tax rates in broad categories. The large number of businesses, which were exempted earlier, will enter into the tax systems. The simplified indirect tax regime will result in easy tax compliance and lower cost.

Conclusion:

The twists and turns in the story of the GST bill have cleared some doubts. But there are some others as well that have been kept on hold. If sincerely implemented, the bill can transform the complete economic landscape of the country. If there is a robust technological platform in place, the dream of a single market can be realized in the next financial year. But it needs the government to work on the war footing. The bill is yet to unfold all its cards on the table.

A Golden Opportunity to Prepare

Amid all the clatter of a new administration and new legislative priorities in Washington, it’s easy to see the trees but lose sight of the forest.

In this case, we’re talking about the U.S. government’s annual budget deficit.

Last year, the deficit grew by more than 30% to $587 billion.

And, according to a new report by the Government Accountability Office (GAO) and Congressional Budget Office (CBO), it’s on “an unsustainable path.”

No doubt the current Congress will pay lip service to the latest warning, as every other Congress and administration before has… just before turning around and opening up the spending spigot a moment later.

This situation has been well documented by experts before.

But the new key point from the GAO is its forecast…

Barring important changes in fiscal policy, the nation’s debt, relative to the size of the economy, will move to catastrophic levels within the next 15 to 25 years. Or it could happen sooner, if federal spending rises at an even faster pace without appropriate cuts elsewhere.

The Path to Ruin

In the wake of World War II, the size of the national debt relative to the economy was a historically high 106%. In the decades since, the long-term average held at roughly 44%.

The debt-to-GDP ratio was just 39% as recently as 2008.

But the fiscal crisis, bailouts and slower economic growth – as well as the lapse of “pay as you go” federal budgeting rules instituted during the 1990s – put the debt-to-GDP ratio into overdrive.

In 2015, the ratio soared to 74%. And last year, it climbed further to 77%.

You can see where this is going. As the CBO notes, large and growing amounts of federal debt:

Mean higher interest costs.
Limit government’s ability to respond to unforeseen events.
Reduce long-term national saving and income levels.
And, more importantly, it makes a fiscal crisis more likely.
The Search for Solutions

The prescription put forth by the GAO and CBO is one that will sound very familiar to you: lower federal spending (with reduced interest-carrying costs), and change programmatic spending on Social Security and federal health care programs.

I won’t plow into that thicket here, but let’s just say that both are going to be a challenge for any Congress or president.

So where does that lead us? It points to preparations for stagflation.

For many investors younger than 50, the idea of stagflation – an economy with both inflationary and recessionary tendencies – is hard to grasp. All that most of this age group has ever known in the past three decades is reliance on paper assets, like owning stock through a mutual fund.

We have to go back to the 1970s and the tremendous rallies in gold and silver to see the value of owning hard assets and the securities backed by them. With gold and gold securities at low prices, it’s not a bad idea to start preparing for that time again.

Peer-To-Peer Lending, Microloans, and Crowdfunding

The financial crisis has had at least one interesting side effect: the rise of alternative and increasingly creative forms of financing. During the economic recession, and continuing to today, credit and other traditional forms of start up financing became more difficult to obtain. As a result, entrepreneurs began looking to newer, less-traditional forms of raising capital that cut out the financial intermediaries (banks, for instance) that are typically present in the process.

Peer-to-peer (also known as person-to-person or P2P) lending is a process of borrowing directly from individuals; in most instances, the lender and the borrower never meet. There are a variety of ways this happens, but generally, the process is relatively simple: The borrower registers on one of the many peer-to-peer web sites and is then matched up with a number of lenders who are interested in investing based on the borrower and the interest rate, among other things.

The P2P industry has been growing rapidly over the past few years: In 2005, there was $118 million in outstanding P2P loans; by 2011, that number had reached more than $500 million. P2P web sites make a profit by charging the borrowers an interest rate (usually 2 to 5 percent) on top of what the lenders require. The overall success rate of getting a loan through a P2P process is about 10 percent. Microfinancing has become more popular recently because new ventures are requiring less financing than in previous years.

In the same vein, one creative funding source that has evolved in recent years is crowdfunding. Crowdfunding (or crowd financing), like P2P, involves getting individuals to pool their resources to finance a project without a typical financial intermediary. Unlike P2P, however, the lenders (also known as (“crowdfunders”) often do not engage in crowdfunding strictly for financial gain. In fact, the “lenders” often actually act more like donors. In a typical transaction, an entrepreneur can go onto a crowdfunding web site, propose the amount needed for the project, and, if the amount pledged is met crowdfunders, receive the funds. Usually, the crowdfunders receive something in return, like a product from the business (a DVD or CD from the film or album produced, for instance) but not their money back, if the project is funded, so the funds are not donations in the strict sense. In fact, studies show that for the majority of backers, the reward is the main motivator of their monetary pledge. Crowdfunding sites generally make a profit by taking a small percentage (about 5 percent) from the projects funded before the money goes to the entrepreneur.

5 Best Commodity Market Ideas

Commodity markets are a little different in terms of trading from traditional equity markets and thus, here are 5 best commodity market ideas that can work in India:

Cautious to negative on MCX crude

OPEC is finding it increasingly difficult to influence crude prices, which means that MCX crude could come under pressure. Moreover, Russia has joined the OPEC consortium in terms of cuts in crude supply.However, the US appears to enjoy a few clear distinctive advantages in terms of expansion in crude supply. Further, Trump has already withdrawn from the Paris Climate Agreement, which opens significant opportunities for the US for undertaking substantial expansion of its shale capacity. Thus, going cautious to negative on MCX crude.

Uncertainty factors could help MCX gold

The World Gold Council has announced that the gold demand for 2017 will not be substantially more than the previous year. Although India and China are the highest consumers of gold, gold prices will not be driven by consumption demand. Moreover, volatility in North Korea and Middle East coupled with other global factors could influence the direction gold prices takes. All these uncertainty factors could help MCX gold.

Using bounces-to-sell strategy for copper might help

The fact that copper has corrected for two weeks on-the-trot gives it a weak outlook. Thus, waiting for a bounce in price to sell could be a good strategy. Moody’s recently downgrading China doesn’t help copper prices either, since China contributes more than half of global copper demand.

Going short-term negative on MCX zinc could be a good option

Owing to environmental inspections, many zinc mines in the Hunan province of China were shut down. This led to subdued supply of zinc. Post completion of inspections, zinc supplies have started flooding the markets, which has brought prices under pressure as well. Moreover, strength of the US Dollar will weigh on MCX Zinc. Thus, going short-term negative on MCX zinc could be a good option

Long trade on NCDEX cumin on shortfall in supply could be a good option

With more than 70% of the world’s supply of cumin, India is the world’s largest producer of cumin. Other cumin producer such as Syria and Turkey are much smaller. Exports of cumin in India are expected to remain buoyant despite higher prices of the commodity. The commodity saw decent open interest gains, which again indicate towards pricing heading upwards. Therefore, long trade on NCDEX cumin on shortfall in supply could be a good option.

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