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Union Budget 2020: Investors deserve their fair share

Friday, January 31, 2020

Deccan Herald

The key to bringing India’s economic growth back on track is to rekindle the animal spirits of entrepreneurs, including the small and marginal entrepreneurs. An economy needs investments to grow, and investments need the savings tap to flow without friction.

The forthcoming Union Budget must address the issue of how to improve the flow of savings to investments, whether in the form of equity or debt. Earlier, only equity capital was thought to take on the risks in business and hence deserving of preferential tax treatment, which led to differentiated capital gains taxation for equity as against regular income tax for interest income. However, if the experience of the past several quarters have taught us anything, it is that even debt capital takes on business risk, maybe not as much as equity but significant none the less. Several savers(investors)in Co-operative Banks, NBFCs, and corporates have faced the brunt of businesses failing to honour their commitment and repay their dues. It is time that policymakers took another look at the long-standing presumption that only equity investment is about risk-taking while debt investments are risk-averse.

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