Sustaining Capital Market and the Highly Bullish Sensex need Imaginative Fiscal policy.

 

Though the trend seen in the stock market is encouraging  due to both enhanced participation of retailers in the market and improved performance of the economy, the need to sustain the stability in the market and confidence in the economic growth is paramount to realize the dream of the Government to achieve the developed status for the economy by 2047.The fact, however, remains that the entire bull run does not seem to have  the full backing of the strong  fundamental macroeconomic factors like mass physical production and employment expansion in tune with the global expectations and also not so encouraging global trends in terms of growth, employment and favorable geopolitical conditions. Even domestically, the widening inequality and uncertainties seen in retail inflation in particular food inflation affecting national savings , employment, investment and production trends can have an adverse impact on the capital market as this segment alone cannot prove to be a support system to sustain the economic growth envisaged. No doubt political stability and the well deserved psychological boost provided by it so far in the system can do a lot of wonders , but the real success can be counted only through very imaginative fiscal and monetary policies capable of taking the full potential of the country to meet the global challenges seen politically, economically, socially and technologically. The capital market boost is welcome but needs to be  made healthy, reflective of all round progress in terms of sustainable savings, investment, employment, production and above all fair and equitable distribution of wealth. Rationalization of both direct and indirect taxes factoring therein the need to bridge the gap between the rich and the poor, aiming at fair distribution of wealth created through dividend distribution, inflation control to help the poorest of the poor, enhancing the  household savings potential to generate demand for goods and services and  keeping the cost of production at reasonably low levels are perhaps some of the  the essential  measures available to the Government to achieve the economic growth  and keep the macroeconomic factors at encouraging levels. This may call for some harsh decisions  to include petroleum products under GST and rationalize GST rates in such a way that the change in rates does not add to inflation but helps to reduce the inequality between the haves and have nots through tweets in the rates by differentaiting goods and services which have inflationary and non inflationary impacts.For instance while any change in rates in respect of mass consumption items like food and travel which has cascading effects on inflation can be minimized where as change in the prices of luxury items like Gold , diamond, foreign travels and high luxury items which are non inflationary can be thought of to lessen the inequality and fair distribution of wealth. Security Transaction Tax and some other innovative products to augment revenues of the government without affecting the cost of living of the masses can also be thought of. The overall approach should be to generate more wealth to benefit all people through enhanced employment, productive investments, fair distribution of wealth through salaries, dividend, bonuses, etc and ensuring perfect and full  utilization of all resources without any leakage of income generation by capturing and improving quality data.  

         

                                Loka samastha Sukhino Bhavanthu 

T V G Krishnan