Morgan Stanley calls Kelkar proposals ground-breaking

The second recommendation is that withdrawals from small savings such as the public provident fund should be taxed as ordinary income even while continuing with tax incentives on contribution and accumulation of small savings. 8216;8216;This could result in a higher savings rate given the circular movement in small savings, ie, reinvestment of withdrawals, which compresses net savings,8217;8217; Desai says.

The first recommendation, if implemented could reduce the government8217;s revenue deficit over the medium term and combined with second proposal; could cause a rise in the savings rate. 8216;8216;This, in turn, could favourably impact growth and job creation,8217;8217; Morgan Stanley said.

If India achieves control on indebtedness and accelerates its growth, riskier assets are bound to do well. 8216;8216;Equities and property would likely deliver double-digit returns, whereas fixed income investments, hurt by the low starting point on interest rates, may be confined to mid-single-digit returns,8217;8217; Morgan Stanley said.