Finance Minister P. Chidambaram has assigned the unpleasant task of preparing the road-map for implementing the EET (Exempt-Exempt-Tax) regime from the EEE (Exempt-Exempt-Exempt) dispensation?which has helped India achieve its household savings to 26.7 per cent of the country'sGDP?to the Kannan Committee. The expert committee is believed to be looking into the utilitiy of the entire range of small saving schemes?from National Saving Certificate to Kisan Vikas Patra. Obviously, the Kannan Committee'sbrief is to find the utility of the saving instruments for the government and not for a retired middle-class senior citizen who is sought to be taxed on his interest income from his life-time savings. Nor would the committee be concerned about the plight of a person who has been fired from one of the private sector firms, which says it is over-staffed and wants to cut manpower to remain competitive in a globalised business environment. By the way, the number of firms handing over the so-called pink slips is quite large, so much so that the middle-aged people being shown the door have nothing else to live on except a meagre interest rate of six to seven per cent from various saving instruments.
Considering even a benign inflation of around four per cent, the effective interest rate available for the savers is just about two per cent which is hardly any incentive for the people to save. What is the Finance Ministry up to, after all? It wants the government to cut its interest cost but it will be at the cost of lower middle-class investors who are now showing a propensity to try the hot and risky stock market. Thanks to information technology tools available to him the lower middle-class investor in the share market is no more a long-term investor; he is showing increasing tendency to become a punter who bets in the marketplace. A survey by the Department of the Company Affairs sketched a profile of the most speculative investor or rather a risky investor in the stock market which is invariably glamourised by the media when the bulls are raging. The most risky investor, as per the DCA survey, is about 30 years of age and he belongs to the lower middle class. The survey done by the Society for Capital Market Research and Development showed that these risky people belong to the income bracket of less than
Rs 10,000 per month and they trade their shares within a few days or a month at the outer limit. This is quite a new trend which runs contrary to the normal behaviour of middle-class investors who were predominantly conservative and preferred to hold equity shares for longer time. The tendency of a punter afflicting the middle-class people is nothing but dangerous, especially when the market would go in for a meltdown. The meltdown is so sudden these risky investors would have lost their entire money by the time they realise that the bears have replaced the bulls. But then, we have economists who argue and argue it well that the percentage of household savings finding way to the financial sector is dismal. It is estimated that of the total household savings of Rs 6,72,000 crore or 26.7 per cent of GDP, only Rs 3,14,260 crore or 46.78 per cent of the total, are invested in the financial sector. The remaining saving is invested in real estate and uproductive avenues like gold. What is the wayout for a small investor who perhaps fits the definition of a common man about whom the ruling Congress-led UPA government is concerned? Is it out of this concern that Mr Chidambaram would like to send the small saver to the stock market where he will be tempted by the penny stocks, promoted and traded by the unscrupulous businessmen who enjoy the patronage of the regulators and market authorities. Since it takes less amount to trade in the penny stocks as against big sum required for the blue-chip shares, the retail investor is tempted to make a fast buck and loses whatever he has in the bargain. But then, the government expert committee would leave a very little choice for the middle-class people whose resources are being transferred to the government kitty which is one big black hole.