New Delhi [India], Feb 5 (ANI): Finance Secretary Hasmukh Adhia on Monday attributed the slump in the Indian stock market to the correction seen in the global equity market.
Adhia clarified that the fall is not related to the long-term capital gains tax, which was re-introduced in the Union Budget 2018.
"People don't know the global market. But, there is a strong connection of all equity markets now. The MSCI All Country Index of equity market went down by 3.4 percent in the last week and particularly in the last two days. Now, if the entire world's stock markets have gone down, naturally it will have its own ripple effect on the Indian stock markets. It is not LTCG effect, but the overall effect of equity markets which has changed in the other countries of the world also," Adhia said at a session organised by Confederation of Indian Industry (CII).
He, however, acknowledged that the timing of the re-institutionalising of the tax was bad.
"The security transaction tax is a very small tax for transaction and the income that we get out of it is very small. It is only Rs. 9,000 crore. There are number of more short-term transactions rather than long-term transactions in the stock exchange. The income of Rs. 9,000 crore must be coming more from short-term transactions rather than long-term, and we have made no change in the short-term transaction. In spite of putting a nominal 10 percent tax on long-term capital gain on equity, it still remains a very subsidized regime. It is unfortunate that our move came at a very wrong time because of global markets also going down," he added.
The Indian rupee too slipped in the early trade on Monday. It opened lower by 14 paise at Rs 64.20 per dollar versus Rs 64.06 on Friday.