Bharatiya Janata Party’s (BJP’s) landslide victory in the key state of Uttar Pradesh (UP) is likely to intensify the government’s war against black money / cash, suggests the latest Bank of America-Merrill Lynch (BofA-ML) equity strategy report co-authored by Sanjay Mookim and Anand Kumar.
The crackdown, the report suggests, could entail more transaction disclosure, increased tax on cash, restrict cash holdings (remaining un-implemented proposal of SITon black money).
This war on cash, BofA-ML feels, will be beneficial for banks as it would result in more financial inclusion, more fees and potential lending. Better reporting can allow private banks to compete with the public sector units (PSUs) for SME (small and medium enterprises) business, it says.
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“Loan waivers (if large enough and if replicated outside of UP) can be taken negatively, especially for the PSU banks. Increased spending on irrigation, affordable housing is good for cement demand. Rural income measures (such as loan waivers, discounts) should be good for staples, cement and two-wheelers. Government measures to restrict cash can hurt sales of high value / luxury items (jewellery and high-end cars),” the report suggests. Read more