?It? ha?s barely been two days ?since? Professor ?Arvind ?Subramanian spoke, holding a pink colored document. The one and half hour long extempore speech that followed the unveiling of the ?document, motivated many into a minute reading of the voluminous Economic Survey of India. ??

?In it, the Chief Economic Advisor spoke of ?g?ender inequality, ?g?rowth projections, sectoral analysis, export growth, investments into India and also touched upon factors such as rising oil prices. He offered an insight into the ?stock ?market ?boom too. He said the rising stock market boom warranted vigilance.

Although market pundits havent called the stock market boom a result of a bullish trend, often reasoning it to the rising risk patterns adopted by buyer’s, but the Chief Economic Adviser shared an example of how investors remained unfazed on factors such as US ?Fed?’s??? probably ?ed ?rate-revisions and continued to remain invested. ??

?In the hour and half long speech, the Professor was ?pointedly ?asked if he saw stock markets as a bubble, which he refuted ?by stating that premium valuations have risen in due course, but he did cite that rising valuations was a global trend.

Indices on BSE and NSE have gained in spite of economic reforms such as GST. A look around how sectoral indices performed from 2nd January – 14th December.

?*As on date is 14th December 2017.

?Although Subramanian’s statement can be labelled as a generic observation, is bound to spark speculation on what the budget could bring for the stock markets. Could the government consider being more vigilant of the stock markets? And if yes, what policy changes could the budget look at: ?

?Long Term Capital Gains Tax:?? There has been a ?murmur that the government was considering doing away with the Securities Transaction Tax, and opt for a Long Term Capital Gains Tax with a few tweaks. STT?,? formulated 14 years ago?,? is currently levied on shares irrespective of the duration of shares being held.?

?The move could make the exchequer fatter, considering ?the ?tax could be computed for a period over 12 months involving bigger profit numbers. ??

?A report from brokerage house Bank of America- Merill Lynch finds that India is the only country that did not have a long term capital gains tax on equities. The report reasoned that short-term capital gains tax applied to investments made for a duration lesser than 12 months, but were exempted from taxes when STT was paid. ICICI securities was cited in a ??Economic Times?? report saying that countries like China, Thailand and Singapore offered full exemptions, while Brazil and Indonesia gave partial ones. ??

???New Cesses?:? There is already a Swach Bharat Cess, a Krishi Kalyan Cess, as well as other charges such as Securities Transactions Tax, Turn Over Tax or Transaction Charges, that are computed in buying and selling of equities. The industry would be wary of additional cesses. But when investors appear unfazed of volatile premiums, why would the Government care of adding to the exchequer by way of additional duties and cesses???

?Considering that we have had a Pink Economic Survey in 2018, it may not be wrong to speculate ?the announcement of something like a Beti Bachao Beti Padhao?? Cess in the 2018 budget. ??

?Mutual Funds?: The domestic AUM fund-size between October-December 2017 was nearly Rs 5394 crore according to a data published by the Association of Mutual funds (AMFI). The asset under management peaked by a positive region. The recent Moody’s revision of sovereign ratings has amplified the AuMs in the industry. At the moment, the tax computed is different for Equity, Balanced and Debt Funds. Taxes are computed in a short-term and long term period of 12 months and 24 months respectively for both Equity and Balanced funds, while for Debt Funds, the short-term and long-term period is 36 months. ?

?According to tax consultancy ??Cleartax.in??, the short-term and long-term capital gains tax on mutual funds should work in the following manner.

Gains on MF-linked SIPs are also taxed a STT rate. It is mooted that the government could introduce a long-term capital gains tax here too. ?

?Other fears from the Budget 2018???

?There are murmurs of a possible unsold inventory tax of nearly 10% on real estate developers to make housing affordable, and rationalize prices. This will lead builders into selling homes to buyers? who are ready to negotiate?.?

?These factors are currently speculative in nature. But the Economic Survey, and the nature of the call from the CEA are enough to arouse suspicion. Considering this is the last budget, the government may not want to rub the markets in the nose. After all, a booming market is always indicative of the growth potential. The Economic Survey being a different process and exercise from the Union Budget, could be an additional reason why the vigilance may just be a call for action rather than a forthcoming action. ??

?But then, this was the same government that took steps such as demonetisation and GST, which were largely unexpected from them. The call to remain vigilant, as the wise Professor put it, hence seems relevant, but to both the Government as well as the investor, till Mr. Jaitley unveils the budget.