Centre’s policies helped investors to make profit, says Nageswaran; justifies changes in capital gains tax

Chief Economic Advisor V. Anantha Nageswaran justifies LTCG tax changes, credits government's fiscal policies for investor gains.

Justifying the changes in the long-term capital gains (LTCG) tax regime, Chief Economic Advisor V. Anantha Nageswaran said it was the macro economic and fiscal policies adopted by the Centre over the last five years that helped investors with accrual of huge capital gains.

Delivering the keynote address at ‘Decoding the Budget’ organised jointly by The Hindu Business Line, NABARD and FICCI, Mr. Nageswaran said the critics of LTCG tax should understand the role of the government in helping the investors before making conclusions.

“So, when we criticise the government of the day for certain tax policy changes, we also need to acknowledge the fact that it is government’s pursuit of such prudent fiscal and macro policies that in the first place paved the way for capital gains to arise,” Mr. Nageswaran said, adding that macro policies had played a big role in generating capital gains.

“Before we take to social media or outfits to criticise policy changes on an isolated basis, it is important to take into picture what the entire macro economic policies have delivered in last 5-10 years in both absolute terms and in context of what is happening around the world,” he said and added that the tax policy of the Centre did not hurt the middle class.

Maintaining that the global trade was marked by frictions, the CEA said restrictive trade activities had grown and risks were getting elevated. However, he said, the global financial markets had generally been on an uptrend in the last four years. “Private corporate sector has started to invest,” he said.

When asked about decrease in the allocation to social sectors, he said higher spend was not an indicator of higher outcomes or better outcomes. Citing the example of demand for MGNREGA jobs even from economically stronger States, he said the Centre was trying to understand what the system lacked. “Is it a lack of financial resources or is it something else? Is the public policy configuration that prevents those outcomes from happening? So I don’t think we should automatically assume that higher outlays mean higher outcomes,” he said.