India’s government pushed through a big tax reform Aug. 8 with the passage of its goods-and-services tax (GST) bill, in what Indian Prime Minister Narendra Modi called “a major step to make doing business easier.”
The bill will combine a variety of state and central levies into a national sales tax, according to Zacks Equity Research. Indian Finance Minister Arun Jaitley predicted the implementation of a GST would boost India’s GDP by one to two percentage points, according to Zacks. Jaitley also sad the GST “is unlikely to lead to any major revenue loss for the states.”
Global investors seem to see the passage of the GST bill as a positive step for India. Goldman Sachs has already named the rupee as one of the top emerging-market currencies, while Standard Chartered Plc. Said it expects gains in the rupee, Zacks reported.
There is one possible speed bump: the strength of the US dollar. A recent strong US jobs report increased the odds of a rate hike from the Federal Reserve, according to Zacks. If that happens, the rupee and Indian equities will suffer, even if only in the short term.
So what does this mean for Indian ETFs? According to Zacks, “the clear impact of the GST bill will be felt only over the long haul.”
Right now, though, they seem to be doing well. EGShares India Small Cap ETF (SCIN), iShares MSCI India Small-Cap (SMIN) and VanEck Vectors India Small-Cap ETF (SCIF) were all in the green Aug. 8, Zacks reported.
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