homemarket NewsConsumer psyche gripped by fear; need stimulus for 12 months to build demand: Raamdeo Agrawal
market | Jan 11, 2022 2:56 PM IST

Consumer psyche gripped by fear; need stimulus for 12 months to build demand: Raamdeo Agrawal

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With the Union Budget around the corner, as part of our special segment, Budget Countdown, CNBC-TV18's Latha Venkatesh decodes what investors are expecting from Finance Minister Nirmala Sitharaman by speaking to market veteran Raamdeo Agrawal, Chairman & Co-founder at Motilal Oswal Financial Services. According to Agrawal, a demand stimulus from the Central government for the next 12 months will go a long way in putting consumer fears to rest. It will aid not only consumer spending but also ensure higher tax collection.

With the Union Budget around the corner, as part of our special segment, Budget Countdown, CNBC-TV18's Latha Venkatesh decodes what investors are expecting from Finance Minister Nirmala Sitharaman. Listing out the investors' demand wishlist, market veteran Raamdeo Agrawal, Chairman & Co-founder of Motilal Oswal Financial Services, spoke to CNBC-TV18 about the measures that are most needed in the current scenario.

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Agrawal believes COVID has done a number on consumer spending. Currently, the consumer psyche is gripped by fear and an average consumer is holding back on spending. What Agrawal believes is the need of the hour, is to drive demand, and the Budget will be the perfect opportunity to achieve the same by announcing a stimulus.
A demand stimulus for the next 12 months will aid consumption automatically. He is confident that the government’s demand stimulus will ensure a higher tax collection as well. According to Agrawal, the Centre’s initiatives to make things cheaper for the consumer will go a long way in bringing purchasing power back in the hands of the middle and lower-middle sections of consumers.
He said, “The kind of initiative government can take is to make things cheaper for them (middle and lower-middle sections of consumers) rather than more expensive. So, it needs more thinking, more analysis; now data is very rich, a fantastic set of data comes from all over. I think authorities would be well advised to work on the demand side and what all is needed to release demand at the lower end.”
As far as growth is concerned, he envisions a great opportunity for India over the next 10 years. He believes a real GDP growth rate of 8 percent will not get impacted by a small hike in interest rates. He said, “The world is trading at 4-5 negative interest rate, who could have ever envisaged that. We have to set our priorities right; you get your growth right and then optimize. So in my mind, the priority would be 8 percent growth and then comes everything else.”
On employee stock option plans (ESOPs), Agrawal shed light on problems faced in taxing the same. He is hopeful that a proposal in the upcoming Budget will help to bail them out of this quandary.
He said, “One Budget aspiration that I have is - taxation for ESOPs; I think the value of ESOP is actually going down in the minds of the people and it’s a very powerful tool for sharing the wealth with employees. Actually, employees have to pay taxes the moment ESOP is exercised. So that creates a lot of problem."
"ESOP has become a very risky instrument in the hands of employees because they exercise and if the price tanks, he/she is actually holding the stock at a loss and if by chance he has borrowed against it, then it messes things up further," he further explained.
"I think what is very simply asked is that the point of taxation must be when he actually sells the stock. Not before that.  I would request the Finance Minister to look into this and give tax treatment to all the ESOPs in the same fashion as it is for start-ups,” Agrawal added.
Watch the accompanying video for the full interview.
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