‘GST 2.0 Is A Phenomenal Move, Volume Growth To Compensate For Price Cuts’: Emkay Institutional Equities CEO

The government's recent GST rationalisation is a significant step forward and the stock market has already reacted positively to it, according to Nirav Sheth, CEO, Institutional Equities, Emkay Global Financial Services.

“GST, it's a phenomenal move.  The stocks have reacted. If you look at the auto sector, I think that is up 9–10%, the stocks are up some 12–13%. My personal view is that the volume elasticity for most of the sectors will more than compensate for the reduction in prices. India remains a terribly price-sensitive market in almost all categories,” he told NDTV Profit. 

The revised goods and services tax (GST) rates, announced by the government last week, will come into effect from Sept. 22. The GST Council has approved only 5% and 18% tax rates on a wide range of goods, compared to the existing four tax slabs.

Sheth dismissed the speculations over GST rate cuts as a reaction to the US tariffs. “I would not see these reforms as a sort of knee-jerk reaction to what has happened because of tariffs. I always believe that the incumbent government runs with a 20-year time frame,” he said.

Responding to the ongoing trade negotiations between India and the US and the tariffs imposed by President Donald Trump, he said, “It is just not possible that the largest democracy in the world and the richest democracy in the world will not sit together. We are not close to a resolution; maybe that's a couple of months away.”

“But, you can certainly get a sense that there is some sort of de-escalation, that is what the markets are looking at,” he added.

Outlining the profits-to-GDP ratio, he observed that much of the action is happening outside the listed space.

“A lot of the investments are happening outside the listed space. When you talk about solar, green hydrogen and data centres, the entire GCC (Global Capability Centre) sector is not a part of the Nifty index. Real estate has a handful of companies that are listed,” the top executive noted.

He expressed disappointment with the current credit growth rate of around 10-11%. He sees it as an indicator of weak GDP potential in the future. 

“I tend to look at credit growth as a great indicator of my potential GDP growth rate. We sort of over-tightened last year. Even today, credit growth is about 10-11%. Importantly, over the last 10-15 years, the credit-to-GDP ratio has been flat at about 60% to 64%. That's my pain point,” he underscored.

He believes India has been "too fiscally conservative and too monetarily conservative."

“I think the interest rates have to be far lower. The credit growth rate has to be far higher because the macroeconomic situation is very well-positioned,” he concluded.

Meanwhile, benchmark Nifty50 stood at 24,946, up 0.31%, at 2:19 p.m. on Wednesday, while BSE Sensex advanced 0.33% to 81,369.53.