Contrary to the popular perception, the reintroduction of long-term capital gains (LTCG) tax in Budget 2018 by Finance Minister Arun Jaitley is a move in the positive direction for the economy, said noted economist Ajit Ranade.
"The reintroduction of long-term capital gains tax is a good move. Indian stock markets fell not because of the introduction of LTCG tax, but due to impact of other factors like interest rates and global market meltdowns," said Ranade at the 19th Malayala Manorama budget lecture 'Union Budget 2018 and Beyond' in Kochi.
"The rates are debatable, but the move is a positive one for the economy. There might be an initial blip in the stock markets. However, this will not affect stock market investments in the long term," he said.
Commenting about the overall tone of the budget, Ranade said it rightfully took the path of restraining expenditure. "The budget had more politics and less economics."
While a slew of rural appeasement measures were announced in the budget, the proposals to fund 22,000 village marts and giving tax holiday to farmer producer companies will hugely impact the agriculture population. "It's the first time we've a clear roadmap," noted Ranade on the tax holiday move.
At the same time, the government's move to provide health insurance cover for about 50 crore people, widely touted as ModiCare, may end up being a good political announcement but sans any good results if the insurance scheme is not interwoven with providing better delivery of health care, he said.
However, the chief economist at the Aditya Birla group, noted that the budget had hardly anything in store for boosting private investment spending. "A zero per cent tax on exports might have been a welcome move," he added.
Talking about the macroeconomics global cues, he said that it will be a "shame" if India is unable to leverage the recent high synchronised growth that global markets have gained.
