Jaitley tax on bourses

It is unjust to entirely blame the Finance Minister’s decision to reintroduce the long-term capital gains tax for the falling Sensex. The market went topsy-turvy due to various local and global developments, including the rising oil prices and a possibility that the RBI may favour hiking interest rates. The Sensex shed about 300 points on Monday, after the weekend mayhem when it had lost 840 points. The fall had to happen because no bull run would remain unimpeded for ever. The tax reimposition, however, acted like a trigger. 

 The sudden levy hurt the market sentiment. No one wants to pay tax voluntarily, especially after being accustomed to enjoying tax freedom for more than 14 years. A 10 per cent tax will naturally be opposed because of high stakes. Last financial year, stock investors had declared an income of Rs 3,67,000 crore, which is over two-and-a-half times more than the country’s health, education and social protection Budget for 2018-19. However, even before the reintroduction of capital gains tax, the Sensex had already started losing its steam after touching an all-time high, three days before the Budget. The 30-share index, which saw a turbulent time after the Budget announcement, quickly came to terms with reality and closed after losing a mere 58 points. 

The sharp fall in the next two trading sessions merely reflects the inherent weakness of the Indian economy and the global weaknesses. The Asian markets also fell on global cues — Hang Seng fell almost 2 per cent while Japan’s Nikkei shed more than 2.4 per cent on Monday. Nevertheless, the government cannot be absolved of the two senseless disruptions — demonetisation and the hasty implementation of GST. The country would have contained the fiscal deficit at a manageable level but for the two blunders. Every bull run is followed by a bearish market. Bankers had cautioned small investors against the bubble. Trading in stocks is prone to market risks, but that does not mean they, like the Indian farmer, should not be taxed.