Letters

Letters to the editor dated January 22, 2021

| Updated on January 22, 2021

Budgetary hopes

Finance Minister Nirmala Sitharaman is expected to revisit the multiple tax structure based on her premise of the “Nil exemptions”, envisaged last year. In fact, such a complex regime has not only failed to usher in the much needed tax reforms but created more confusion. Any prudent tax regime should be simple and also pro-tax payers. The basic tax exemption limit must be raised to ₹5 lakh in the coming Budget along with suitably expanding the scope of Section 80 of the Income Tax Act. The real estate sector also needs a push through some tax breaks.

SK Gupta

New Delhi

Combating inflation

With reference to the article ‘Do not tinker with Flexible inflation Targeting’ (January 22), while growth is estimated to contract 7.7 per cent in 2020-21, urgent measures are needed to revive the pandemic-devastated economy. The inflationary spiral mainly because of the rise in the prices of food articles due to bottlenecks in storage facilities, supply chains and hoarding needs to be addressed. The RBI’s Monetary Policy Committee must look for sustaining liquidity with a more economical rate to push investment and consumption.

The RBI’s liquidity measures have provided the economy sufficient liquidity; however, the credit expansion is hampered by lack of demand for credit for policy rates need to be cut further and transmission ensured. It is also imperative to enhance the risk appetite of lendersto prevent the credit expansion turning unproductive.

VSK Pillai

Changanacherry (Kerala)

Fundamentally sentimental

With reference to the editorial ‘Mount 50K’ (January 22), it has to be admitted that the jubilation is only for 2,08,96,069 people or 1.53 per cent of the population of the country, who hold equity worth of ₹227.51 trillion, which is more than one and a half times the GDP (₹145.46 trillion) of the country. This data speaks about the importance or lack of it to the common man of the weighted average price of 30 stocks traded at a building at the tip of Mumbai peninsula.

Bulls and bears do not represent the health of the economy. Instead, their interplay is decided by the foreign institutional investors (FII), who keep buying to jack up share prices in Third World countries and once the domestic investors’ sentiments are gained, they do the rest to lever up the price further. What we saw intraday on Tuesday was this first leg. At the second leg, at a critical moment, FIIs will sell in bulk to book profit and exit. The psychological bar of 50K was breached and “corrected” back due to the forces of these two legs.

Indian stock market responds to sentiments; not to fundamentals. Or Indian stock indexes are fundamentally founded on sentimentalism.

PD Sankaranarayanan

Gurugram

Indeed Dalal Street is euphoric over the milestone of the Sensex reaching 50,000 mark, thanks to the positive global cues, sustained FII inflows, strong corporate earnings and liquidity, positive developments on the vaccine front, change of guard in US and low interest rates. The market experts hail the feat, also advise caution to investors to stay focused on quality. The fast recovery of the economy from the Covid disaster is the key reason for the Sensex’s rise. Yet, jubilation must be accompanied by caution since the equity bubbles may be punctured due to steep valuation and the impending correction. Anyhow a growth in the midst of negative factors must be applauded .

NR Nagarajan

Sivakasi

LETTERS TO THE EDITOR

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Published on January 22, 2021
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