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Sandesh Kirkire, CEO,
Kotak Mutual Fund says that there is a need for consolidated trading platform
for equity and debt asset classes; operating within a single (or a coordinated)
regulatory framework to increase penetration within the retail investors
segment.
 The
upcoming Union Budget for financial year 2012-2013 has importance more than
what is ordinarily attributed to this already very critical annual event. In
the current context, the high borrowing cost in the economy has restricted
private sector consumption and investments. Therefore, the main policy thrust of
the budget must aim primarily at creating a positive investment climate by
reducing capital and borrowing costs for productive sectors.
Recourse
to Fiscal discipline by a two-tiered application of frugal expenditure and
ingenious resource generation may be required. The government should lay down a
path to move towards a fiscal deficit of under 3% of the GDP. In this context,
there is a need to revisit the Reddy Committee report of 2004 on these
borrowings.
The
planned detangling of myriad of taxation laws and rules through GST and DTC too
has been stalled. Policy movement on
that front too is highly anticipated in the upcoming budget.
The Budget
must particularly seek to emphasize investments in the infrastructure sector,
which is in requirement of investments of US$ 1 trillion in the next 5 years. To address this (amongst many things), a comprehensive
and strategic outlook on energy security may be needed.
From
the capital markets point of view, there is a need for a consolidated trading platform
for equity and debt asset classes; operating within a single (or a coordinated)
regulatory framework. The availability of equity and debt assets through a
single trading platform may lead to increased penetration and higher capital
mobilization within the economy.
ELSS
has been a highly effective mechanism to popularize equities investment within
the retail segment and also promote relatively long-term savings commitment
from the investors. Therefore, the tax-savings status of ELSS must be continued
under the new tax codes.
Moreover,
the empowerment of the Mutual funds to provide a scheme that allows the investor
an avenue to invest for retirement and annuity, is needed. This would also promote long-term savings
behavior. Granting EET status to such a scheme may prove to be an effective feature,
and may widen the market participation. The
enactment of the PFRDA and a consequent thrust for bringing it within the EET
status would drive long term investments.
Finally,
it has been a long standing demand of the industry has been to align the
taxation status of Fund of Fund’s (FoF) with the underlying scheme, rather than
the current - ‘debt status’. An Equity FoF investor is essentially investing in
equity schemes, and as such, should be able to avail the tax benefits which
would otherwise accrue to him/her, had they invested directly into those
schemes. The rectification of this imbalance would greatly improve the acceptance
of the product segment, as also bring the FoF investors at par with regular
investors.
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