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New govt should abolish short-term capital gains tax, open market to NRIs
May, 12th 2014

What do you think are the most important reforms required in the capital markets that the new government should focus on to provide a direction and boost to the capital markets?

I am of the view that the policy framework must address the macro-level issues to boost confidence in the economy. The economic growth happens either through accelerated investments or through higher levels of consumption, which increases incomes and investments.

In order to give a policy-level boost to the capital market, the new government should abolish short-term capital gains tax on equity investments. A lot of the unholy overseas structures for investments into India will also disappear with this initiative. Today the investors are worried about harassment by the I-T department and are faced with unmanageable amounts of paper work, inspections and investigations.

The market should be thrown open to NRIs without putting a number of conditions as it is today. Similarly, capital market should be thrown open to foreign investors — individual and institutional, as long as the money flows in through regulated sources. As of now, the conditions attached and procedures to be followed are not simple and are suitable only for professional investment institutions.

What are the three things that come to your mind that lagged from the policy or regulatory front over the last five years and that affected the markets and overall growth?
First and foremost, the country should have a functioning Parliament which was not the case over the last few years that ultimately resulted in the complete paralysis in law-making. A lot many bills, including many that are important for managing the country’s economy have been pending for years.

Secondly, there must be a decision that policy amendments will not be with retrospective effect. Of late there is a report that the I-T department has started issuing notices to all unlisted companies that issued shares in the past five years at a premium, asking them to show why the premium should not be taxed as income of the year!

Thirdly, settle all the environment-related disputes for the projects that have been started but are stuck due to a lack of policy clarity about the future. Above all, the single most definitive factor that adversely affected foreign direct investment into the country — ‘The Great Indian Corruption Story’ — must be reversed once and for

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