Business Today

Union Budget 2017-18: Govt should stay away from making foreign investments via P-notes zero

We need to await and understand the magnitude of adverse impact on the economy by the demonetization and also government's proposal not to re-monetize the economy by the same proportion (of high-value currencies removed from the system.) 

BT Online        Last Updated: January 5, 2017  | 12:34 IST
Union Budget 2017-18: Govt should stay away from making foreign investments via P-notes zero

With less than a month away from the Union Budget, Business Today in a communication with G Chokkalingam, Founder & Managing Director, Equinomics talked about his expectations from various sectors.  Here's what he had to say.

  • The Budget needs to avoid any further major disruptive policies - either related to economy or to the capital markets - at this juncture.
  • We need to await and understand the magnitude of adverse impact on the economy by the demonetization and also government's proposal not to re-monetize the economy by the same proportion (of high-value currencies removed from the system).   
  • Today the capital markets and economy are highly integrated in terms of currency exchange rate and thereby impact on the repayment burden of both corporate and the government. After two years, the broad indices of the domestic equity market is down by 4 percent.
  • In this background, the government shouldn't execute any proposal such as making foreign investments through participatory notes zero and hike in aggressive manner either short- or long-term capital gain tax. Such measures should be implemented in a surprise move only during the robust economic conditions and bull run in the stock markets. The reality is that both the equity markets and exchange rates are to a significant extent at the mercy of FII outflows from the country as their total holding of Indian equities is almost near India's forex reserves.     
  • This is high time the government takes firm steps to improve the industrial economy - over 2,600 companies have posted mere 3.5% y-o-y growth  in net profits in the September, apart from near stagnating IIP numbers.
  • The government should not worry about the fiscal deficit target - rather it should dilute it to some extent to increase the developmental expenditure in the country.
  • The government should also Union Budget for (or seek) substantially much higher dividend income from the RBI and the same should be used to spur public expenditures.
  • There should be firm action plan for shutting down the loss-making PSUs in terms of concrete proposals for their shut-downs and suitable aids for the employees.
  • The government should stay away from announcing a large no of unproductive social welfare schemes.


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