If I were FM: Ajay Menon charts 5-point investor wishlist

As part of a Budget special series by ETMarkets.com, we reached out to money managers seeking their perspective on Budget 2023 with a simple question: What if I were the Finance Minister of India.

Union Budget 2023-24 is the last budget before the general elections next year and thus expectations are running high that the government might announce a populism budget with many big spending.

But on the contrary, I don’t expect any major policies and announcements in this Budget, though it is very likely that the Government can target capital spending of Rs8.8tn in FY24E (up another 17% YoY, ~20% of total spending), and raise it to ~3% of GDP.

1)Increase allocation under 80C/special incentive to ETF products:
Now if I were the FM of India, I would prioritize ways to increase participation in the capital market which is still highly under penetrated.
I would rationalize the tax slabs for the individual taxpayer which is on the higher side so that investors are left with more money in hand to channelize it toward the equity market.

I would also increase the limit under Section 80C which would incentivize financial savings towards investment products like ELSS schemes of mutual funds.

Additionally, in order to promote investments in ETFs, which are relatively safer products, especially for newbies and young investors, I would provide special tax incentive on similar lines to Additional NPS Contribution under Section 80CCD1B.

2) Rationalizing capital gain tax
If I were FM, I would not touch capital gains tax but would rationalize it across asset classes that currently is struggling with different taxes, exemption limits, and holding period. I would also increase the exemption limit of Rs1 lakh on equity which has not been revised since its incorporation in 2018.

3) Digitalization and easing NRI account opening
Currently, the existing process of account opening for NRI involves a lot of cumbersome paperwork. If I were FM, I would rather ease out the whole process by making the process digitalized similar to what has been done for domestic investors.

NRI is a big untapped segment that gets deterred due to physical KYC requirements. This can be solved through digitalization as the bank accounts are already KYC enabled.

4) Relief fund for IPOs
If I were FM, I would create a relief fund to protect retail investors from the significantly expensive IPOs which lure investors with fancy stories at extremely high valuations and then tank more than 50% post listing due to high underperformance.

Such cases were largely witnessed in the calendar year 2021 when 51 IPOs listed on the mainboard of which 33 are still trading below listing price, while 11 are down 30-60%. Post poor performance of these companies, 2022 saw the majority of IPOs coming at reasonable valuations as the demand got a little dampened.

In order to safeguard small investors a fund should be created which offers protection or an exit route to these investors for 6-12 months from the time of listing.

5) Tax incentives for new-age investment advisory products for retail investors
As more retail investors are entering the system, it would be good to encourage cos to offer digital solutions to channelize retail money into equity markets.

These companies can be offered lower tax rates for the first few years for the use of innovative digital offerings.

(The author is MD & CEO, Broking & Distribution, Motilal Oswal Financial Services)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)