 "New govt may scrap equity scheme")
Other major programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Food Security Act, Direct Benefits Transfer, the Aadhaar project of the Unique Identification Authority of India and the Land Acquisition Act might also be reviewed.
“The majority view here is that RGESS is a terrible scheme and should be modified or replaced. We can easily come up with a better one. The proposal will be made to the new government,” a finance ministry official, who did not wish to be identified, told Business Standard.
| A FAILED SCHEME |
| Total no. of RGESS accounts 15,645 No. of accounts with investments 12,419 Value of initial investments Rs 61.7 crore Subsequent investments Rs 12 crore Source: NSDL |
RGESS was conceived by then finance minister Pranab Mukherjee to encourage the savings of small investors in the domestic capital markets and introduced by his successor, P Chidambaram, in September 2012. On the face of it, it looked attractive. It was exclusively designed for first-time retail investors in the securities market and offered additional tax deduction on investment up to Rs 25,000 over and above the limit of Rs 1 lakh provided under Section 80C of the Income Tax Act.
It, however, did not give the desired results. According to data available with the National Securities Depository Ltd, there were only 15,645 RGESS accounts, with an initial investment of only Rs 61.7 crore, as on April 30, and subsequent investment (in the second year) of Rs 12.09 crore.
“There are too many riders. It is only for first-timers, one can invest only up to Rs 50,000, annual income of the investor should be below Rs 12 lakh, there is a lock-in period of three years and the benefit can be availed only during those three years,” the official explained.
However, various fund houses' RGESS schemes, barring one run by IDBI, broadly outperformed the CNX Nifty which gave one year return of 19.4 per cent as on May 22. LIC Nomura's Series 1 Direct Plan gave returns of 32.2 per cent in the last one year, the highest of all such schemes, and IDBI senior 1 plan yielded 18.4 per cent, the lowest return. The average return of RGESS run by the fund managers was 26 per cent in this period.
Jagannadham Thunuguntla of SMC Global Securities said, “The only way to attract new client addition is to sustain bullishness in the market and money making opportunities.”
Another analysts said on the condition of anonymity that retail investors can't be drawn to the market by giving just a token tax benefit. The retail investor should have confidence in the markets to be attracted to it, he said.
There are also indications that the National Democratic Alliance government could drop the names of the Nehru-Gandhi family from many schemes.
Officials said the NDA government might majorly rethink other UPA flagship programmes. The new administration will be told that MGNREGS needs to be revamped.
Instead, schemes such as the Pradhan Mantri Gram Sadak Yojana might get priority. “The focus should be on giving a boost to infrastructure projects such as roads and highways or electrification,” said another finance ministry official.
According to officials Rs 25,000-30,000 crore every year could be saved through better expenditure management and shifting of focus from revenue expenditure to capital spending.