dhirendra kumar ceo value research finally the rajiv gandhi equity savings scheme announced in the union budget this year is getting off the ground the trigger seems to be the securities and exchange board of india sebi boards recent decision to recommend the inclusion of mutual funds in the scheme theres still no authoritative word on the shape it will take but it does seem that some mutual funds probably etfs based on the largecap indices will be permissible investments under it back in march when it was announced the scheme looked like one of the more interesting things in the budget however in the shape that it was initially announced and laid down in the finance bill it appeared to have as many negatives as positives the idea at that point was that the scheme was exclusively meant to encourage firsttime retail investors to buy stocks by giving them a tax break while the appearance of a new way for individuals to save tax by encouraging them to save is always welcome the schemes focus on making investors buy actual stocks seemed odd surely as most observers commented it was better for firsttimers to invest in equity through equity mutual funds if the governments goal was to whet retail investors appetite for equity investing while triggering the flow of fresh savings into the capital market then the safest way to do so was through equity funds but no it turned out that this wasnt the governments goal at least that wasnt a major part of it the goal was to do so by specifically getting firsttime retail investors to actually open depository accounts and buy shares directly it wasnt clear why this bit was important but there it was spelt out in black and white in the union budget the new section 80ccg that the budget added to the income tax act doesnt spell out all the details and says that they would be notified later but it does specify that the investments would have to be directly in shares however it leaves undefined what a new investor or a retail investor means since the government has issued no further direction in the six months that have since passed the scheme is still a nonstarter however in these six months there has been an overwhelming amount of opinion expressed publically by a wide range of people that equity mutual funds should be part of the rajiv gandhi scheme my own opinion actually goes a bit beyond that i think not only should equity funds be a part of the scheme direct purchase of equity should be excluded from it its not just that funds are a better way for the firsttimers who are small investors but that going to a broker and buying shares directly is a really bad idea for such investors the etf idea thats being mooted now is an amalgam of the original plan and sebis new recommendations on promoting mutual funds the original idea