The last month saw a good rally in the bourses on the back of some important announcements:-
- Diesel price hiked by Rs 5.
- Capping of subsidised LPG cooking gas cylinders to six a year per household.
- FDI in multi brand retail of upto 51%, 49% in aviation and 75% in some broadcasting services.
- With-holding tax liability reduced to 5% from 20%
- Approval of a debt relief package for the state power distribution companies.
- Approval of sale of minority stakes in 4 public sector undertakings raising upto Rs 15000 crores.
Recently the Union Cabinet approved FDI of upto 49% in pension and insurance. This would result in companies raising capital without creating additional debt and ensure higher returns along with the safety of principal and the facility of withdrawal as per convenience. This is already evident in the new plans introduced by LIC namely Jeevan Saral, New Bima Gold and Jeevan Ankur.
The Banking Law Amendment Bill was introduced in 2011. This will help in raising capital especially for PSU banks. This will remove the ceiling of Rs 3000 crore on the amount of authorised capital that the nationalised banks must hold. This would also allow the nationalised banks to come out with bonus issue. The RBI would also have the power to remove directors if they are proved to be working against the interests of depositors.
The Companies Bill will provide for a tighter control by shareholders over the management decisions. The National Company Law Tribunal will be entitled to direct an investigation into the companies by the Government. Merchant bankers, lawyers etc will be pulled up for mis-statements in the prospectus.
The DTC (Direct Tax Code) Act will widen the income tax slabs and increase the disposable incomes. It will bring down corporate tax rate to 25% from 34%.The GST (Goods and Services Tax) Act will treat the whole of India as one territory. It will divide the tax burden equitably between manufacturing and services.
There are a lot of positives amidst all the gloom that has been projected by the media. India is one of the 4 countries which had a GDP growth rate of more than 5% last year inspite of Coal-G, 2G, CWG etc. The economy is on the path of growth and investors in the markets should not panic on the basis of "Breaking News" and sensationalism.
