The Union Budget is a bit like a celebrity marriage: lots of anticipation, excitement and ritual, but very little that is a complete surprise to anyone. The last path-breaking budget was the “Dream Budget” of 1997 after which most have been little more than accounting exercises with a bit of poetry thrown in.
Regardless of political affiliations, the finance minister has usually ensured that there is nothing substantial to either praise or criticise.
Path-breaking developments usually come disguised as mundane little announcements and trickle out through the year. In the last decade, the budget has had as much to do with serious policy-making as the clanging of gates at Wagah Border has to do with national security.
There will be some Rs 50 crore allotted to some yojnas and some Rs 25 crore to an exotic field of traditional education or sport, and there will be the thumping of desks.
So, what are my expectations from this budget? I’d say there is one area where some of the budgets in the last decade have made a difference to the capital market: the area of tax directed investing.
Though purists say that tax should not drive investments, it has worked, and I’d suggest that as we are entering a tough phase, where international flows into the Indian capital markets need to be de-risked, this may be the right time to make this even better. There are three big headlines that I’d like to see on March 1, 2008:
1. FM abolishes STT on retail investment in equity mutual funds. SIP investments below Rs.50,000 per month, shall no longer attract STT, provided the investments have remained in the fund for at least three years.
2. SIP seen as an alternate to PF. Persons aged 21-50 years can now take long-term SIP investments with a combination of equity and debt mutual funds as an alternate to PF contributions from salary.
3. Investments by individuals in fixed income mutual funds placed on par with equity mutual funds for tax purposes.
I am not sure I’ll see these headlines on March 1st, 2008, but ever since the Dream Budget, I have been given to dreaming, when Mr Chidambaram takes the podium.
(Krishnamurthy Vijayan is the CEO, JP Morgan MF)