The Budget is just a few days away. Given the interest and focus of the finance minister, the expectations of the people are extremely high. The capital market, of course, is pinning a lot of hopes. Suggestions abound; I too have some but these are all focused on encouraging investments, and not just trading, and are aimed at channeling household savings into the capital markets. Some suggestions are fiscal. The Budget, as is the practice, can also be used for making some policy announcements.
* To help capital formation and not just trading, RGESS should be made available only on investments made in all IPOs/FPOs and also cover all PSU offers for sale and on investments into such mutual fund schemes that invest only in the primary market. The investment limit should be raised to R1 lakh and be available every year, and continue to be aimed at only those individuals who have an annual income of up to R10 lakh, but irrespective of whether they are first-time or existing investors. The lock-in should also be only for one year. Demat accounts should be opened on the basis of bank KYC norms; the demat KYC may be mandated only when the investor wants to sell.
* Our markets are dominated by speculative trades. To encourage investments, the STT on delivery transactions should be removed completely.
* Investors should be allowed to book losses on very old untraded shares listed only on regional stock exchanges or lying suspended on the BSE (over 3,900 IPOs in the 1992-96 period have not been trading for years now), almost all of which thus have a zero value. As per the present laws, an investor cannot secure any deduction of his capital losses with respect to such shares, until he finds a buyer (at any price) and thus has a valid sale transaction. All original investors holding up to 5,000 shares of such companies that made a public issue after April 1, 1992, and whose shares have not been traded at all in the preceding 5 years, should be allowed to offset the complete value of their investments against any type of capital gains, though setting off against any type of income would be even more welcome. This scheme will be very welcome and be pro-small investors, helping erase bad memories, and allowing investors to look afresh to the future (a government-designated bank or