A 0% short-term capital gains tax to pull in money into stock markets

Feb 27 2013, 11:01 IST
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SummaryIndia was best performing market last year, but retail investors missed party: Shobhana SUbramanian

into the market, boosting the sentiment like little else can; given how one year can be a long time in such a dynamic world, investors would be comfortable knowing they can quit when they want to without being taxed for it. More participation in the markets will only make them more liquid. In short, a strong market will allow corporates to raise equity while not pressuring the fisc too much; the biggest beneficiary of this move will be the government since it’s hoping to raise a bunch of money from disinvestments.

If the markets rally—as they should now that corporate earnings seem to be bottoming out — the government can more than make up the R3,000 crore from higher premiums on the shares that it plans to sell. What’s more, over-indebted corporates can de-leverage, taking the pressure off both their own balance sheets as also those of banks. As for the economy, there’s nothing like the wealth effect to get consumers spending.

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