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How about a Jan Nivesh Yojna in the budget, Madam Finance Minister?

Simpler and standard KYC, ease of doing investment and appropriate financial education will channelise domestic savings for India's investment needs. This will reduce dependence on foreign investors.

Published: 28th January 2022 04:43 PM  |   Last Updated: 28th January 2022 05:05 PM   |  A+A-

Union budget, bahi khata

What surprises will Union Budget 2022 hold? (Photo | Shekhar Yadav, EPS)

Last year's budget provided a healing touch to our pandemic-hit economy. This year's budget should capitalise on that and ensure accelerated growth and equitable distribution. 

Today, agriculture, private investment, government spending and trade are well above pre-pandemic levels. But consumption especially in certain segments requires the healing touch. 

We are selling more SUVs but less entry-level bikes than before the pandemic. Our gold imports and gold loans are both touching all-time high levels. However, entering the financial markets is not as easy as it can be.

The MNREGA scheme has done a wonderful job not only in providing employment at the bottom of the pyramid but also in creating rural infrastructure.  Additionally, if we add an urban focussed employment guarantee scheme, it will go a long way in providing support to the bottom of the pyramid and also support overall consumption.

The housing and real-estate sector has very little import dependency. They also have a high multiplier effect.

Stars are aligned for rapid growth in the housing sector. Our housing loans are available at lifetime low rates. But the tax concessions for the housing sector has remained the same since 2014. Any increase in the same will not only boost growth in the sector but also leave a higher surplus in the hands of tax payers and support consumption. A limited period special incentive for first-time home buyers will be sone pe suhaga and support equitable distribution.

ALSO READ | 80% of Indians support tax on the wealthy in Budget: Survey

Global investors are valuing Indian equities at more than three times that of Brazil and Russia and at about a 40 % premium to Chinese equities. We have broken away from the BRIC peers through our COP 26 declaration and other steps to improve ESG (Environmental, Social and Governance) practice. Reiterating our commitment to ESG will go a long way in enhancing our brand and maintaining our premium equity valuation. 

In 57 PSUs, the count of independent directors has fallen by 66 % from FY19. This has adversely impacted ESG scores of PSUs and hurt their valuations. Today, listed PSUs are valued at $285 billion. If these PSUs get re-rated on a conservative basis compared to where they were trading few years ago, their value will rise to $567 billons. The Government will be the biggest beneficiary as the largest shareholder.

So, appointment of Independent Directors on PSUs will be one step in reducing PSUs valuation gap with market. Administrative reforms, strategic divestment, and public private partnerships will help in increasing the value of PSUs. 

It pains me to see that while Indians are good savers, their investments are tilted towards physical assets including Gold. In two decades of this century more than $ 433 billion has flown out of India towards net import of gold. If we add smuggled gold and gold ornaments passing through the green channel, the amount could be in excess of $500-550 billion. 

India Gold Trade
(In US$bn) 2000-2021
Jewellery of gold unset 65.6
Jewellery of gold (with pearls) 2.5
Jewellery of gold (with diamond) 64.4
Jewellery of gold (with precious/semi-precious stones other than diamonds) 7.4
Other non-monetary unwrought forms of gold 24.3
Total exports estimate 123.4
Total Gold imports 556.7
Net Gold imports 433.3
Note: We have assumed Item No  2,3 and 4 to consist 45% gold

Our outflow towards gold imports is more than the foreign portfolio investments received in the last two decades. Our dead savings locked in gold could be more than $2 trillion which is almost equal to the government’s capital formation in this century.

Cumulative
Particulars FY 2000- 2020 (USD Billion)
Savings 9,537
Investment / GCF 10,053
Public 2,210
Private 3,548
Household 3,564

While gold buying is driven by traditions, emotions and black money needs, it is aided through ease of investment. Buying gold is much easier than buying a financial instrument. Lack of ease of entry into financial markets along with a lack of knowledge has also resulted in loss of Rs 180000 crore plus for more than 1.5 crore Indians in collective investment schemes especially at the bottom of the pyramid and in rural and semi-urban India.

Our Government through the Jan Dhan Yojna has ensured banking to every Indian. Now, my sincere request is to launch a Jan Nivesh Yojna.

ALSO READ | Shankkar Aiyar Column: States, not just budget, hold key to GDP growth

Simpler and standard KYC, ease of doing investment and appropriate financial education will channelise domestic savings for India's investment needs. This will reduce dependence on foreign investors and make India truly Aatmanirbhar. The Jan Nivesh Yojna will ensure the participation of Indians in the India Growth Story and help earn better returns. Our largest listed bank, insurance, telecom, FMCG, automobile and mutual fund companies majority owned by foreigners. It is not too late for Indian investors to own Indian companies.

Disclaimer: Views expressed are personal and do not reflect the views of Kotak Mahindra Asset Management Company Limited.

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